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Copyright 2015 by Rahul Desai

All rights reserved. This book or any portion thereof

may not be reproduced or used in any manner whatsoever
without the express written permission of the publisher
except for the use of brief quotations in a book review.

Credit and copyright are listed for respective owners.

Printed in the United States of America

First Edition, 2015

Trendify LLC
29 Valley Wood Dr
Somerset, NJ 08873

www.the1st30.com

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README.txt 5

Why to Start a Startup 6

The Startup Toolkit 10
Learning to Think 28
Hooked on Phonics, Crack, etc 34
Competition is for Losers 40
Startup Viagra 46
I Love You 50
Case Studies on Getting $hit Done 55
Charity Bake Sale 61
Trust Fall 67
Starship Enterprise 74
Its More Than Good, Its Great 79
The Operating Room 83
MGMT (not the band) 88
Use Somebody 94
The Hardware Store 98
Risk Aversion 102
Sell Yourself 107
To Infinity & Beyond 112
Conclusion 117

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 Hi there! My name is Rahul Desai and Im currently
studying Operations & Information Management at
Georgetown University. I also run a startup called Trendify,
which utilizes data analytics to actually predict startup
success and develop insights into those outcomes. Ive
become keen on learning as much as possible about startups,
mostly through books and online courses.
To that end, Ive been following along with Sam
Altmans course at Stanford CS183B: How to Start a
Startup. I decided that it would be worthwhile to turn the
course notes into an ebook, with the goal of condensing as
much information into as little space as possible. I know that
we all live busy lives and that its hard to sit through long
lectures, so I packed this work with the critical insights from
Mr. Altmans course and the guest speakers he hosted. There
are also lots of pretty pictures to keep you entertained and
motivated.
This work is titled The First 30% because thirty
percent of the learning that founders and companies do at Y
Combinator is generalized. It can, theoretically, be applied to
all startups. The other seventy percent is intended to be
company-specific for YC companies. Since its inefficient to
impart case-specific knowledge to people in a non-
interactive form, I felt that sharing the generalizable thirty
percent would be a great way to expose more people to what
I thought was an amazing source of intelligence and advice.
As startups become more and more popular in our society,
its crucial to arm ourselves with as much knowledge as we
can.
I truly hope this proves a useful and enjoyable
resource to you. Please feel free to contact me through
www.trendify.io. Big thanks to Jake Haberman, Jay
Bhandari, and the rest of Team Trendify for their support.

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 In our era, startups have achieved a level of respect
previously held by bankers, lawyers, and doctors. News
about coding wizards getting amazing job offers and
college dropouts pursuing incredible startups seem to
make the headlines every week.
Dustin Moskovitz, cofounder of Facebook, strives to
set the record straight by citing some erroneous reasons for
starting a startup. Firstly, startups are not nearly as
glamorous as they are made out to be in shows like Silicon
Valley and movies like The Social Network. Secondly, they
allow founders neither the self-management nor scheduling
flexibility that people so often seek in transitioning to
startups from conventional jobs. Finally, the statistical
likelihood of making a huge impact and tons of money are
slim to none.

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 Starting a company is not as glamorous as Hollywood
paints it to be. In fact, serial entrepreneur turned venture
capitalist Mark Suster calls it entrepreneurshit. He states
that positive outcomes prove exceedingly rare, despite the
fact that the mass media only highlights success stories
(survivorship bias). Statistics show that 75% or more of all
startups fail and that 66% of all venture capital investments
are wasted.
Theres clearly an ugly side to entrepreneurship, and a
lot of your effort and willpower will just go towards hard
work on the company. Startups are stressful: constant
engineering problems, customer complaints, and sales
obstacles are part of daily life.

All of this stress stems from responsibility; founders

fear failure for themselves and all of those who follow them.
In many cases, people depend on you to make a living, or in
the case of a young team, theyve devoted their youth to
your company. So youre now responsible for either their
livelihoods or the opportunity cost of their time. Youre on
call constantly and you have to stay focused and keep
working because so much rides on your success.
Additionally, media attention can be stressful: positive media
is glamorous but negative, unwanted press is an extreme
stressor.

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 Another source of stress that people never mention is
how committed founders are. Startup employees can quit,
just like they would a normal job. Founders could quit, but
only at the risk of ruining their reputations and potentially
crippling the company. Moreover, founders are not the
bosses of their own companies; instead, they have to cater to
the media, employees, clients, and partners, upon whom
their success ultimately rests. In fact, so much in a startup
starts with the founders; if your commitment flags, the whole
teams will too, and thats unacceptable in a startup.
Ultimately, your financial rewards are very strongly
correlated with your startups impact on the world. Because
of this, it makes sense to actually join someone elses
company unless youre certain youll make a huge impact and
earn over a billion dollars at your own (which you probably
wont). At a late stage company, you already have an existing
user base. Additionally, youll also have access to that
companys resources and a team, where you can leverage
your ideas into something great. Compare that to some
untested, user-less idea floating around in your head.

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 You should start a company when you cannot resist
the pull of your idea; youll need that passion to get around
all of the roadblocks. That is to say, you should launch a
venture because the world needs it; if your idea is important
and will impact the world for the better, only then should you
pursue it.
The other reason to start up is because the world
needs you to do it; do you have area expertise or some other
reason that youre suited to tackle this problem? If not, your
time might be better spent elsewhere because you might end
up outcompeting a team that actually has the right skills;
Outcompeting a better team will create a suboptimal
outcome for the world, which youll have to bear forever.
When you have an idea that refuses to let you go, you
have something worth starting up for. You should feel that
you dont own the idea, but that it owns you.

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 Startups prove interesting because they are
somewhat of an even playing field. While previously
successful founders will have easier access to press and
financing, startups thrive with young, inexperienced
founders, and old, veteran founders. Factors that are
detrimental in other occupations, like being poor and
unknown, can in fact be beneficial to startups. Be that as it
may, startups are no walk in the park. You shouldnt start up
just for the sake of doing it. You should be striving to solve
some great issue that youre obsessed with.
In the last chapter, you learned why to start a
company. But what are you going to do if youre inclined to
go down this road? What are the foundational parts of a
startup?

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 The four factors pictured overlap to some degree, but
they are, without a doubt, the basis of a great startup. Of
course, luck is a huge factor, and you can still fail even if you
have those four things down. The formula for a startup
would be something like: Idea x Product x Team x Execution
x Luck = Outcome, where Luck is some random number
between 0 and 10,000 and the Outcome is the companys
success or failure.
If you manage the first four things, though, you will
have a good chance of achieving at least some amount of
success. However, there are some exceptions, a notable one
being Palm and the smartphone market:
The Palm Pre should have been the smartphone. Palm
was positioned to out-compete the bulkier, less intuitive
models from Nokia and Blackberry. However, something
truly unexpected happened; tech titans Apple and Google
saw the market opportunity and decided to release their
own smartphones based on iOS and Android, which rapidly
ate up market share. This pushed Palm to #3 and ultimately,
led to the companys sale to Hewlett-Packard. This is where
the luck factor comes into play, and Palm had some
horrendous luck.

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 It seems like ideas have become uncool. Some people
say youre supposed to spend minimal time on an idea,
without thought to whether this idea is useful or profitable,
and instead just jump into starting the startup. And pivots
are supposedly great; the more pivots the better.
That thought is partially correct because things
evolve in totally unexpected ways and become pivots. Even
so, the system is broken. A bad idea is still bad, but the pivot-
happy startup ecosystem creates companies that simply
dont generate true value for the world.
Moreover, great execution is at least 10x more
important and 100x harder than a good idea, but even great
execution on a suboptimal idea will not save a company. In
fact, successful pivots are almost always based on ideas that
the founders themselves wanted. For example, AirBNB
reached greatness in this manner:

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 The definition of an idea encompasses many things:
size and growth of market, company growth and
defensibility strategies, and so on. You need to analyze every
facet of your idea before starting up. If your company works
out, you will be there for a decade or longer, so its
imperative to determine the long-term value of the business.
Plans are generally worthless because they limit
adaptability and things will certainly change. However, the
act of planning is valuable, but generally missing in todays
startups. Long-term thinking will give you a huge advantage
if you force yourself to cultivate that mindset.
No doubt, your plans will change. Ideas will get bigger
and expand to become more ambitious, but the key is having
a core that can be developed in interesting ways. A good idea
is not just flash or coolness it is something that is also
difficult to replicate. Its pretty bad if someone else can
dream up and implement the exact same great thought.
The idea should come first, then the startup. Founders
create companies to solve problems that they feel are truly
compelling. Even if you have multiple ideas, work on the one
that occupies your mind when youre trying to procrastinate.
In fact, the best companies are mission-oriented, driven by a
sense of purpose. Its hard to get that without a great
founding idea. Missions compel people, especially founders,
to commit lots of time and energy towards the very risky
proposition of launching a venture.
More people external to your company will help you if
your idea isnt derivative. People like supporting truly
innovative projects, so its easier to found a hard startup,
which is incredibly counter-intuitive. Copycat ideas dont
excite people and dont compel teams to work hard
missions do. Awesome ideas are very different in one big
way or envision something totally new, but they are not
clones.
Lots of great ideas sound terrible: before they
launched, who wouldve wanted a search engine without a
web portal (Google), a social network limited to college kids

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(Facebook), or a way to crash on random peoples couches
(AirBNB)? All of those ideas sounded horrible at first, but
turned into runaway successes. Ideas that sound great are
going to attract wannabe founders like moths to a flame.
You, on the other hand, want to create a monopoly. You
should be able to say: Today, this small subset of people is
going to use my product/service, but eventually, I will get the
entire group, and in the future, everyone will use this.
Have conviction in your own beliefs and a willingness
to ignore naysayers, but note that there is a fine line
between right and crazy, so be careful as to which side you
occupy. This is also why its ok to talk about your idea; truly
good ideas dont sound like they are worth stealing. You
want to tell people that you know your idea sounds terrible
but go on to specifically outline its awesome qualities.
Ideation includes thinking about the growth of the
market. Will your market be big in 10 years? Will it still even
exist? Investors dont seem to care about market growth
over company growth, but you should. Its perfectly fine if
youre going after a small, rapidly growing market; in fact,
customers in these markets are generally desperate and will
put up with imperfect, iterative products. You want a fast
market, a tailwind in your sails. See the next page for a tip on
fast markets; software is changing everything.
Why now? Why is this the perfect time for this idea
and this company? Why couldnt this work two years in the
past or future? If you cant answer those questions, you
should be at least a little suspicious about it. Successful
startups have both great ideas and great answers.
Scratch your own itch. You'll understand your own
problem much better than having to interview customers to
build product. If youre building something someone else
needs, realize your disadvantage and get really close to the
customers, and therefore to the problem. Try to physically
go work with them, if possible, and if not, talk to them almost
to the point of being annoying.

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 Another counterintuitive thing about ideas is that
theyre almost always easy to explain and understand. If it
takes more than a sentence, its too complicated. Your great
idea should be a clear vision articulated in a small number of
words.
Finally, your idea should be people-centric. What do
customers want? What does the market want? If you can
answer those questions truthfully and accurately, you have
an advantage when it comes time to build product.

A product is something a company builds to solve a

problem, including customer support, product explanations,
and anything else involved in the way your customer
interacts with the product, and more.
Turning a great idea into a great product is hard, but
crucial and, fortunately, fun. Great products are always new,
so it can be hard to give advice on what to build, but you can
always ask how to build it. Knowing what to do and how to
do it are the keys to success in achieving your goals.
Most startups early days revolve around building
product and talking to customers, all the time. You should
reevaluate if youre allocating your time differently. Most
problems that startups face are far easier when you have an
awesome product that you can point to and say we did that.
Ignore financing, recruiting, partnerships, PR until you have
an amazing product that will, by its nature, attract all of
those things for you.
Make something people cannot live without, and you
have a strong foundation for future success. If you can
choose between making a lot of people like a product and
making a small number love it, always go for the option that
engenders love. Its easier to expand from a lovable product
than a likable product.
Of course, it would be best to make a product that
tons of people love, but bigger companies will jump on those
opportunities, generally. Lovable products practically grow

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themselves through word of mouth. If you are waiting for a
partnership and justifying your lack of growth, something is
wrong. Worry about making your product amazing, above all
else.

Remember that straightforwardness is good. Great

products are simple to use and even simpler to get started
using. When in doubt, think about the things you use on a
daily basis. Most importantly, simplicity forces you to do one
thing really well. For example, theres a reason that everyone
flocked to iPhones despite the fact that other smartphones
were already on the market. Steve Jobs emphasis on user
experience and design resulted in a product so simple that
we didnt realize we wanted it. The original iPhone was the
epitome of what smartphones were supposed to be,
powerful but simple and intuitive; it succeeded in defining
the rules of the game in mobile, all due to the fact that it was
simpler than the competition and great at fulfilling its
functionality.
Great founders are fanatical about even the smallest
product details. They make sure the copy looks perfect, and

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that customer service is carried out wonderfully. Among Y
Combinator companies, the founders that connected
Pagerduty to their customer service tickets in order to
respond to emails late at night tended to be successful.
Founders should feel physical pain when the product sucks;
dont ship crap to your clients, and if you do, fix it quick.
Go recruit customers in person, without the help of
online advertising. Find people that will give you feedback
constantly, and who will eventually fall in love with your
product. Listen to these people, get close to them, and they
will tell you how to make a product that theyll pay for. You
need to ensure that the company can turn user feedback into
product decisions constantly. The voice of the customer is
the only one that matters.
For example, when Pinterest was young, the founder
would go to local Apple stores and load Pinterest as the
default webpage on all of the computers. This would expose
all of the stores customers to the Pinterest brand, and
hopefully pique their interest.

Good founders do work themselves; they do sales and

customer support. They use metrics to stay honest, but the
company will build whatever the CEO decides to measure. If
youre building an Internet service, ignore total registrations
and look at growth, active users, activity levels, revenue and
other factors that actually have a bearing on your success. If
things arent looking so hot, you need to be brutally honest;
these are startup growing pains.

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 First, lets look at cofounders. Cofounders and their
relationship are among the most important pieces of a
startup. In the history of YC, the number one cause of early
startup death is cofounder blowups. For some reason,
though, many wannabe founders treat choosing cofounders
as less important than regular hiring. However, choosing a
cofounder is like getting married; after all, youll be together
for many years.
Student founders are notoriously bad at this because
they just pick random people: Hey Im looking for a
cofounder and I dont know you, but lets start a company.
Even doing a regular hire like this would seem insane.
Choosing a random person or an acquaintance as your
cofounder will usually end in disaster. A great way to meet
potential, good-quality cofounders is by looking at your
social circles in college or by working at an interesting
company. For example, Facebook and Google are almost as
cofounder rich as Stanford.
Its better to have no cofounder than a bad one, but
flying solo is still pretty bad. Not having a cofounder
indicates that you couldnt get someone else to believe in
your idea, and that seems like a bad sign for the future.
So when you have potential cofounders in mind, how
do you select the right people? You want someone who is
relentlessly resourceful. You need people who are tough,
imperturbable, and constantly adapting to situations. They
prove decisive, quick, creative, and ready for anything. In
todays zeitgeist, the best example would be Katniss
Everdeen from The Hunger Games.

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 Obviously, you want a smart cofounder, but you
definitely need to prioritize mental toughness and a sense of
calm as well. Furthermore, you need to find yourself a
technical cofounder if you dont possess area knowledge;
hiring tech people or outsourcing the labor just does not
work well. What happens when the new hires dont actually
know what theyre doing, or when the firm youre
outsourcing to goes bankrupt?
Finally, you want to hit the sweet spot of cofounding:
how many is the right number? One isnt great, but five is bad
because that many voices drown each other out. Shoot for a
total of two or three founders, maybe four in rare cases.
The cofounder equity split should be near equal, and
should be cemented early on. You need to make sure you
have a vesting structure in place to prevent people from
taking shares and running away with them. That will hurt you
when you go to get investment.
Now its time to consider employees. When you want
to hire, try not to. You should only hire when you physically
cannot shoulder the burden anymore. People these days use
employee count as a measure of a companys coolness. If you
dont have many people working for you, youre seen as a
joke; if you have a lot, people get really impressed. But over-
hiring is a bad thing because it creates a high burn rate (lots
of money lost monthly), organizational complexity, and slow,
bureaucratic decision-making. Startups are meant to be the
antithesis of that; indeed, speed is our only weapon in most
cases.
Bad hires kill companies, so take it slow and be certain
about your talent. AirBNB spent five months interviewing
their first hire and only hired two people in their whole first
year. Their CEO used to ask if people would take the job if
the applicant only had one year left to live. The intensity of
that question shows you how much these hires really matter
and how they define your company. You need people to
express the same obsessive belief in your company that you
do; although that might seem like an insane thing to ask of

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people, it creates culture. When AirBNB faced crises, all
employees would live at the office and work until the crisis
ended. The first forty employees there all say they felt like
they helped found the company.
Even if you hire slowly, you must fight to recruit the
best people. When youre in hiring mode, you prioritize
finding amazing talent. Founders underestimate how hard it
is to attract awesome people. Great hires have lots of other
options so it can take a long time to convince people that
your mission is worthwhile. How much time do you spend on
hiring, then? The right answers are none of your time or a
quarter of it either youre not hiring, or its the biggest
thing on your plate.
The best people know that they should join a
rocketship, so you need product to prove that you are. Even
if you just want to work for a startup, you should try to
choose a rocket. Pick a company that works but one that not
everyone realizes will be huge. If youre looking closely
enough, youll be able to see this. Good hires know this truth
and they will wait to observe the company trajectory.
Mediocre hires can kill companies. Never compromise
on this; if one of your first five to ten hires is subpar, it might
irreparably damage your organization. Whenever you hire,
you need to ask yourself: Am I willing to bet the future of my
company on this person? You should always be able to
answer that, and if you can, you wont mess up your hires.
Where can you find talent? The best source of hires is
people you already know or people that your hires already
know. Personal referrals are the trick to hiring; at Facebook
and Google, human resources will ask you about every smart
person you have ever met in order to recruit them. Finally,
look outside of Silicon Valley for recruits; the SV region and a
lot of central California is brutally competitive, but theres a
whole world of talent out there.

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22
 For most early hires, experience does not matter as
much as belief and aptitude. When you are growing and you
face lots of challenges, its better to recruit people with lots
of experience (e.g. Facebook bringing on Sheryl Sandberg as
COO).

1. Is this person smart?

2. Do they get shit done?
3. Do I want to spend tons of time with them/ would I
hang out with them?
4. Would I mind working for them if the roles were
reversed?

If you can say yes to all of those things, you can be

fairly certain that you have a good hire on your hands. Ideally
youve worked together in the past, but after you interview,
be sure to bring them on for a trial project. Youll both learn a
lot and be able to make a better evaluation and hiring
decision. Ask about their previous projects and call their
references; really dig deep and ask tough, detailed questions:
Is this person in the top five percent of people youve ever
worked with? Would you hire them again? What did they
specifically do? Can this person communicate clearly?
Good communication skills correlate with good hires.
If someone is hard to talk to or cannot communicate well,
that proves a real problem. Furthermore, these people need
to have an appetite for risk. If they are considering between
joining Goldman Sachs or your company, its probably not
going to work out for you.
You need people who are maniacally determined.
Paul Graham says that you should be able to describe any
employee as some animal at their task. You need
unstoppable people who get shit done. Your people should
seem like the best in the world at what they do.
Equity is a touchy subject, but your first ten
employees should get ten percent of the company. When

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youre vesting your equity (and you should be), these people
will have to earn it over years, and will be contributing much
more value than theyre getting out. They add continuous
value; investors, on the other hand, generally dont. Theyll
cut you a check once, and advise you occasionally; after all,
they have other portfolio companies.
After youve gotten employees, you need to retain
them. Employees must feel happy and valued, which is why
equity is so important. You can never let resentment set in
among your employees. Praise your people. Let them have
credit for the good stuff, and allow yourself to absorb blame
for the bad. Furthermore, do not micromanage. People like
having autonomy, mastery, and purpose, especially if theyre
Theory Y employees, which most startup people are.
How do you fire people when it is not working out?
Founders often wait too long, hoping that the problem will
resolve. But you have to fire fast when you realize theres an
issue; its painful and tough, but just remember that youre
doing a hard thing to save your brainchild, your baby. Of
course you need to get rid of bad talent, but you need excise
those who create office politics or a persistently negative
mood as well. Those are poison to young companies.
How, then, do you balance making employees feel
secure with your need to fire fast when things go south? The
decision to fire is not based upon one or two mistakes;
everyone will make a few mistakes or even more. Be a good
team leader, and be forgiving. The need to fire comes up
when someone is messing up constantly and then, it should
be obvious to everyone. If you look at someones choices and
you would do the opposite every time, you will almost
automatically know you need to intervene.
You should avoid having a remote team in the early
days, because communication and speed outweigh
everything. Video conferences and emails dont work as well
as meeting in person. Of course there are outliers; for
example, 37Signals (now Basecamp) has 28 of its 39
employees working remotely:

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 Execution is probably not the most fun part of running
a company, but is definitely the most critical. The best way to
have a company that executes well is to execute well
yourself. Founders create the culture; they serve as the role
models for all other employees. Your team must see you as
an endlessly driven execution robot. Ideas are plentiful and
worthless, execution is rare and valuable.
What does a good CEO do? The first four roles seem
obvious: set the vision, raise money, evangelize the mission
to talent, partners, press, etc, and finally, hire and manage
the team. But the most important and often forgotten part of
being a CEO is setting the execution bar; no one can do this
except the CEO.
Can you figure out what to do? Can you do it? Given
that you know what youre doing, you need focus and
intensity to do it. A thousand things will compete for your
attention daily and you need to pick a handful to work on.
Those two or three things will be the most important things,
everything else will either wait, or come at you in crisis
format (think dodgeball in elementary school gym class).
How do you determine what merits your focus? Set
goals for each week, and then everyone can execute based
on those. Founder set the focus. The best founders repeat

25
goals over and over; they obsess over them and force
everyone else to do so as well. Communication is key here;
even a small communication breakdown could ruin
everything. You must focus on growth and momentum;
startups live on these.
Additionally, you need to be incredibly intense. You
can have a startup and one other thing in your life, but not
much else. There is no work life balance, in reality. You need
to outwork your competitors.
Its easy to move fast and break things, and its easy to
be obsessed with quality, but its insanely hard to do both.
From Day One, you need to create a culture that places huge
value on both. Create bias towards action. Do small things
really well and really quickly.
The best founders are fast. They pick the right size
projects, and move really quickly: they respond to email
instantly, they make decisions at light-speed, and they
generally do whatever it takes.
The best founders also show up. Altman explains that
he got on a plane to close a deal that a competitor was about
to steal from under him. His team sat in their target clients
office all day until they finally agreed to talk; the plane trip
ended in a contract for Altmans company. Get on the plane
in marginal situations.
A winning team keeps winning. A team that hasnt
won lately loses steam and keeps losing. If youre in software,
keep growing. If you are in hardware, ship product when you
say you will. When in doubt, sales fix everything. If you can
rack up small wins and revenue, other problems will
disappear.
Facebook created a growth group in 2008 to work
on small project to help the company grow faster. This group
changed the whole dynamic and got the company back to
winning. Its essential to establish an operating rhythm early
on; ship product and launch features regularly. Review
metrics constantly. Dont worry about competition unless
theyre beating you with real, shipped product.

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27
 Startups are very counterintuitive; this may be simply
because accurate knowledge about them has not permeated
our culture yet, but in any case, be cautious about trusting
your intuition in a startup. Starting up is like skiing in that
sense. When you first learn to ski and want to slow down,
you instinctually lean back, but that sends you hurtling down
the mountain even faster. To achieve control, you need to
suppress your initial impulse. There are six major
counterintuitive truths people must know about startups:

Founders at YC persistently ignore their advisors/

partners advice because that advice is generally
counterintuitive, so it seems flat out wrong. You do not need
anyone to give you advice that doesnt surprise or shock you;
you could come up with those answers on your own. Thats
why there are many ski instructors, but not many running
instructors; in fact, its odd to even put those two words
together, because running is so innate.
Be that as it may, you can rely on your feelings about
people. Youve been interacting with people forever, and
business interactions are similar to other human
interactions. It is, in dealing with people, a mistake to not
trust intuitions.

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 A French class can teach you to speak French but no
amount of startup education can actually teach you how to
start up. Facebook didnt succeed because Mark Zuckerberg
was a startup expert. He was a total novice at startups;
Facebook was first a Florida LLC. Most people know thats a
terrible idea. Zuckerberg did well because he knew his users.
One of the troublesome things about startups in
modern life is that people see startups in the media and then
go through the motions of running a startup. People come up
with a plausible idea, raise money, get an office, recruit all of
their friends and then realize theyre out of luck when they
neglected the one thing a startup is supposed to do: make
things that people want.

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 Why do people play house so much with startups? It
turns out this is what we are trained to do, all along. From
getting into college and even in college, education is as
artificial as running laps; people are trained, consciously or
unconsciously, to exploit the difference between going to
school and actually learning. We were trained to succeed at
games like this: fake it til you make it. But there are no tricks
for startups. Any time you hear about tricks, think bullshit.
The only real growth hack is making something people love.
In a startup, there is no boss to trick. You, as founder, are
the authority, and your success depends on providing
tangible products to users. All users care about is whether
the product does what they want it to, just like a shark only
cares about whether there is meat or no meat; you cant
wave a red flag and fool a shark into thinking its meat. You
can fake it in front of investors, but that just delays the
inevitable. There is no bag of tricks in Startupland.

If you found a startup, it will own you for several years

at least, but more likely a decade or even the rest of your
working life. There is a real opportunity cost to startups.
Larry Page might seem like he has an enviable life, but he
started running when he started Google and hasnt stopped
to catch his breath since. Every day shit happens at Google
that only he as the emperor can deal with. If he goes on
vacation, a backlog of stuff accumulates, and he has to bear
this because he is the companys role model and cannot show
fear or weakness, and because billionaires get less than zero
sympathy when they complain.
Starting up is like having children; your life changes
irreversibly. Many things are easier to do before you have

30
kids, and so many people delay that choice for a while. Then
why is the belief that college kids should be starting up left
and right so prevalent? If you start as a college kid, you will
either be a real student and not have a startup or you will run
a real startup and not be a student. Age twenty is probably
not the optimal time to start a company.
A successful founder will never get to bum around
some exotic country. When Zuckerberg goes somewhere, its
as a de-facto state visit. He will never get to backpack across
Europe. The company runs you as much as you run it. Usually
startups take off because the founders make them take off; it
can be stupid to give up your life to do that at twenty.

In starting a startup, you are trying to estimate not

only what you are, but also what you could become. Who
can, with accuracy, do that? Its easy to see how smart people
are, but its hard to see how tough and ambitious someone

31
will become. The only way to discover what your chances are
of being the person who wins in Startupland is to actually do
it. (Team Trendify is actually trying to fix this and make
startup success more objective).

When you make a conscious effort to come up with

startup ideas, you will think of ideas that are both bad and
plausible-sounding. This is really scary because it will force
you into a place where you and everyone else will be fooled
by them before you realize theyre no good. The best way to
come up with startup ideas is to take a step back.
Instead of making an effort, train your brain to dream
up ideas unconsciously. You wont even realize that you have
startup ideas at that point, but thats how Google, Yahoo,
and Apple were created. They were just projects, and thats
because they were such outliers that the conscious mind
would reject them as ideas for companies. You will realize it
when a side project is supposed to become a company.
To refine your ideation process, you need to learn a
lot about a lot of things that matter. Work on problems that
genuinely interest you. Finally, work with people you like and
respect.
What counts as an interesting problem? If youre
looking at tech as some kind of virus thats spreading
throughout everything, you want to get yourself to whatever
will be infected next. Live in the future and ideas that seem
prescient to others will seem obvious to you; youll know
that something ought to be done about those issues.
You should be pursuing your intellectual curiosity
within some domain when founding a startup. The startup, in
fact, should act as a vehicle for the ulterior motive of
expanding your expertise. Just learn.

32
33
 What most people do incorrectly when they want to
build a startup is thinking I have this really great idea, so I
am not going to tell anyone about it. Im going to build and
then tell a few people and launch it on TechCrunch. Thatll
get me lots of users.
Because you failed to get feedback early on, you
might end up with a lot of hits on your site, which rarely turn
into converted customers. You could go buy some users, but
thats a vicious cycle that just causes you to hemorrhage
money. The only thing you should do from the first
paragraph is launch on TechCrunch or somewhere like that.

You need to really figure out how your idea is solving

a problem. You should describe the problem in one sentence,
optimally. How does it relate to you? Are you really
passionate about it? Do other people have this problem? You
need to go out and verify by actually talking to people.
For example, Adora Cheung of cleaning service
Homejoy initially started a company called Pathjoy. This

34
company strove to make people happy by creating a
platform for life coaches and therapists; however, the
founders didnt even want to use their own service. Dont do
something youre not passionate about.
When you have something you care about, immerse
yourself in that industry. You should take time to understand
the little bits and pieces of the industry because the devil is
in the details. That is when you see inefficiencies that you
can exploit by cutting costs, for example.
You should be obsessed with the space. Learn about
all of the competitors and similar companies; read their
financials and S-1s, read every Google search result, sit on
their earnings calls. This is not to say become overly
concerned with what your competitors are doing. Rather,
you need to develop deep expertise in your field.
Second, identify customer segments. Ultimately, you
want a product that everyone is using. Realistically, at the
start, you want to find a specific part of the customer base to
tailor to.
Finally, before you do anything, determine what the
user experience will be like. How do you communicate with
your customers? How do they learn about you? You need to
visualize what the perfect user experience is. Then put it on
paper, and then in code.
Now that youve got all of that down, you can focus on
building product. People love to talk about the minimum
viable product but you should remember that user
experience is part of that. Make sure your users are happy
and that youre solving their immediate needs.
Position your product in one sentence: this does X, Y,
and Z. You need a one-liner because people get bored
quickly. You need to describe the functional benefits really
rapidly to keep potential users interested. At the end of the
day, what are people getting out of it?
You have an MVP done, but when you want to launch
it and get users, what do you do? You should be using it. Your
family and friends should be using it. Go post on Hacker

35
News and Product Hunt as well as on local community
mailing lists. Go to where your target audience is, and do
whatever it takes to convince them. Your conversion rate
will be low but that is how you start.
When you have users, make sure they can contact
you. You need inbound feedback, whether by phone or email.
If you send surveys, youll never get anything but extreme
opinions; go physically meet with users to get the most
honest feedback. Make it a comfortable conversation and
take them out for coffee or drinks.
Track customer retention as well as reviews and
ratings. Then ask how likely they are to recommend you to a
friend. Use that to figure out net promoter score; having
people that will talk about you is good for business. Reviews
and retention should be going up over time; if something else
is happening, you need to go figure out what the issue is and
what you need to fix or change.

36
 You can get the best feedback if you make people pay
for your product. If you are going to build a product that
youre eventually going to need people to pay for, get to that
point fast. Then you can optimize how to get more paying
users in the door.
When you have ten users, build for them, not for the
10,000 you might eventually have. Focus on the people you
have on board so that you dont alienate them. Build things
yourself. If you try to automate too fast, you move into the
issue of not being able to move quickly and iteratively.
When you are starting out, perfection is irrelevant.
Worry about the generic case of the core user, and focus on
growing well. If you just take user suggestions at face value,
your product will be Frankenstein, which means that you
take tons of user feedback and squish it all together. Users
might not always give the best solutions. Figure out what the
core problem is, and then figure out how to fix it before you
throw on a bunch of suggested features that just obscure it.
Unless youre building something that costs millions
of dollars to build, dont wait to launch. At this point, you
should be ready. Find one growth channel and execute on it
until it caps out; if it doesnt work, try something else. Make
sure you come back later and give a failed channel another
try.
There are three types of growth: sticky, viral, and
paid. Sticky is when existing users come back and pay you
more or use you more. Viral growth is when people talk
about you and convince other people to use your product.
The third is paid growth; you can buy growth if you have
enough cash. In any case, growth has to be sustainable. You
need to deliver a great, addictive experience. Then people
will want to keep using you.
When you start, 100% of your user base will use you.
The next month, say 50% come back. How many come back
in the third month? Eventually this curve will flatten out and
the people left over will be your core consumers, who will
stick with you. Consider the following graph.

37
 One year later, you want more than 50% of people
the second month. A bad retention curve has no one coming
back; thats a crappy business.
Viral growth hinges on an intrinsically amazing user
experience. You need to make people want to tell everyone
they know about you. Then you need an awesome referral
system that lets people talk about you easily.
Where can you tell users that they can and should tell
others about your product? Do you tell them after they sign
up? Do you tell them after you see that theyre highly
engaged? No matter what, you need to tell them at a point in
time when they really love what you do.
How do you incentivize people to share? $10 for $10
works you get $10 for inviting your friend and that person
will get $10 too! But you can try numerous other methods as
well. Then you need to optimize how the friend will convert
from a visitor into a customer.

38
 Finally, you can pay for growth. Youre going to risk
putting money out there to get a return (i.e. users). Figure
out your customer acquisition costs. Are they lower than the
customers lifetime value (how much youll make off of this
user)? If thats the case, youre earning a profit. You should
segment this out; for example the customer lifetime value
(how much each user is worth in total, aka CLV) in Memphis,
Tennessee will probably be higher for a country music
marketplace than in Greece. Finally, dont spend beyond
your means. Remember that payback time is very important.
People should be paying you every three months, maybe
every twelve if you love risk.
When you start, focus on getting the first user, then
two more, then four more, and so on. After you hit 100 users,
you can start focusing on real, high-velocity growth. If
nothing is working to grow your company, perhaps its time
to pivot. If no one is staying, or the economics dont make
sense, try another idea.

39
 If youre starting a company, you should always aim to
establish a monopoly and avoid competition. Businesses are
valuable when two conditions are met: a) that you create X
value for the world and b) that you capture Y percentage of
X value. X can be huge and Y can be small, or X can be
smallish and Y can be big, but the company would be
valuable in either case.

The airline industry is a lot bigger than Google in

terms of domestic revenue: $195 billion vs $50 billion
respectively. However, aviation is highly competitive, but
Google is a monopoly, so lots of airlines have to split that
195B whereas Google can take home a tidy 50B.
People seem to talk about perfect competition a lot,
however, and seem to shun monopoly. This might stem from
the fact that many of us learn about perfect competition
early on in Econ 101, its easy to model, and its efficient,
especially when things are static. Our society tells us that
competition is good; consider anti-trust laws that the
government enforces.
In reality, competition does not allow people to profit
much and forces businesses to fight for their lives daily.

40
Monopolies are often more stable, more profitable, and
symptomatic of true, valuable acts of creation. Peter Thiel
states that these are really the only two types of businesses
in the world.
Monopolies, of course, like to pretend that theyre
not. They dont want government regulation so theyll say
that theyre locked in intense competition. On the other
hand, competitive businesses vying for supremacy will
always argue that theyre somehow differentiated. The basic
lie you tell in competition is that youre in a small market; in
monopoly, you say the market is much bigger than it appears.
Capital accumulation and competition are antonyms;
in perfect competition, all of the capital gets competed away.
So if youre opening a restaurant, no one will invest because
restaurants are extremely competitive and will just lose
money. Youd be forced to say something like were the only
Finnish restaurant in Palo Alto. So now youre fictitiously
limiting your market. Are the intersections youre positing
real? Do they make sense and have value?

41
 In startups, people think it is ok to just combine
strings of buzzwords and a narrative. If you find yourself
saying that your company or product is the something of
somewhere, its probably going to end up as the nothing of
nowhere. The Harvard of Kansas isnt the Harvard.
If youre Google, on the other hand, and you own 66%
of the search market, youre never going to tell people youre
a search company. If Google says it does advertising, its only
taking home about 3.5% of a ~500B market globally.
But maybe Google says its a technology company,
operating in a trillion dollar market. Theyll say theyre
competing with car companies with self-driving automobiles,
and with Apple on iPhones and TVs, and they compete with
Facebook and Amazon and Microsoft, too. Theyll say there
is no way theyre a monopoly, and they should certainly not
be regulated. So you can see the incentives to distort the
true nature of companies.
However, companies in tech are generally so often
monopolies that you have Google, Amazon, etc. all making so
much cash they dont know what to do with it. So how do you
replicate their success? First, you want to go after a small
market; take that over and expand in concentric circles.
Going after a massive market can be a mistake because it
shows that you havent defined your market or your
categories correctly when determining your intersection.
Amazon started as an online bookstore and moved
into other forms of ecommerce. eBay started with auctions
for Pez dispensers and Beanie Babies and then moved into
all sorts of auctions. PayPal began with power sellers on
eBay and got to 30% penetration. Small markets are often
underrated; these markets seem so small that theyre
worthless, which is definitely not the case.
Be a one of a kind player in a small ecosystem, for
example, like Facebook opening up only to Harvard kids at
first. Furthermore, you cant copy others or the past. The
next Gates, or Jobs, or Zuckerberg wont be doing things
those people did.

42
 To establish and maintain a monopoly, you should
build something an order of magnitude better than the next
best thing. Amazon had ten times as many books. PayPal
could move money from buyer to seller ten times as fast. A
powerful improvement on a key value dimension is critical if
youre not building something brand new.
Conventional wisdom states that you should be the
first mover to tackle something. Perhaps its better to be the
last mover: Microsoft had the last operating system for years
and Google is the last search engine. They outlasted the
early movers and learned from those early failures. In fact,
analyzing discounted cash flows will tell you that 75 to 85%
of all value will come from cash flows far in the future, so you
should value durability and longevity as much as growth.
A monopoly will have network effects, economies of
scale, and proprietary technology. Networks will actually
grow as time passes allowing the network effect to become
more robust, and therefore allowing the monopoly to
become bigger and stronger over time. Economies of scale
are practically built into software because the marginal cost
of another unit of software that youre selling is either zero
or very close to it.
Proprietary tech is tricky; you need to get peoples
attention by being better than the next best thing initially,
but you also cant let yourself be superseded. Why will you
be the last breakthrough, at least for a long time?
There are entire sectors where talented innovators
actually end up capturing no value. The smartest physicist of
the 1900s, who came up with relativity, didnt even get to be
a millionaire. Railroads were valuable but went bankrupt due
to competition. The Wright brothers flew the first plane but
didnt really make any money.
People really only made lots of money when creating
things in two broad scenarios. The first is a vertically
integrated monopoly, like Ford or Standard Oil at the start of
the twentieth century. These require a lot of complicated
coordination in order to get many puzzle pieces to fit

43
together perfectly. This is extremely hard to accomplish
today. The second scenario is software that has extremely
fast adoption. This is critical to capturing and taking over
markets.
Competition is for losers. Thats weird because we
think of losers as people who are bad at competing. We say
losers are the people who are really slow on the track team
in high school or those that dont get into great universities.
Perhaps we should think of competition itself as
fundamentally flawed.
However, we see competition as a form a validation.
We are imitative creatures who learn by modeling others
behavior. This is an unhealthy practice in Startupland;
consider the thousands of people who try to become famous
athletes or actors and fail. You should be doing something
truly unique, not something that everyone else is doing.
We get so wrapped up in winning competitions that
we lose sight of truly creating value. While competition
makes you better at whatever it is youre competing at, it
seems foolish to run through a door that everyone is
scrambling to get to. Instead, go around the corner and walk
through the huge gate that no one is taking.

44
45
 Before the advent of Google, search engine
optimization (SEO) was really easy. All you had to do was
include your search terms of interest a bunch of times in the
text of whatever you were putting on the web. After Google
became super popular, you started having to worry about
pagerank and relevancy. The moral is that growth has
changed a lot in the past couple of decades.

What matters most for modern growth? Retention is

the most important thing today. The one overarching truth is
that if your growth curve is asymptotic to the x-axis but
never intersects it, you have a viable business. This analysis
will help you understand growth in any market.
Graph out the number of users who have been on
your product for X number of days and then check how many

46
are monthly active. The curve should flatten out rather than
decreasing. If you dont have product market fit, do not grow
your product. It will not work.

There are ~2 billion people on the internet. Facebook

had 1.3B active users. When you have your market and you
have your active users, you can figure out your retention
rate. Who is comparable to you? Are you anywhere close to
their rates? Thats a great way to model success in your
market.
So, how do you operate for growth? How do you
scale? First, startups should not have growth teams. The
whole company should be the growth team. The CEO must
head up growth or, again, growth will not work. You need to
get everyone on your team to actively help grow the
company so publish crucial metrics: messages sent for a
messaging app, gross merchandised volume for
marketplaces, etc. Use data to find magic moments.
How do you drive marginal users to the magic
moment that gets them hooked on your service? The magic
moment at Facebook is See Your Friends right when you
sign up. Their goal is to get users to ten friends in two weeks,

47
which correlates to better retention. Companies like Twitter,
Facebook, and Whatsapp show you how to connect to
people as soon as possible in their registration flow.
Startups tend to focus on power users. People in
social media say oh we should try to optimize for
notifications because these users must get so many. Those
users understand how the company works and can probably
filter notifications already. Instead, focus on the marginal
user: the one person who never gets a notification. These are
the users who leave and come back, or they just leave.
Therefore, the biggest metric at Facebook was getting users
to ten friends.
So what is the one critical, North Star metric in your
company? That shows you whether you will succeed. Note
that most metrics are correlated so youll probably be fine
measuring whatever metric, but you should try to find the
metric that most aligns with your mission. Pick the one that
fits with you and that you can stick with for a long time. Have
a north star and a magic moment to help marginal users.
Thats operating for growth.
In Field of Dreams, the phrase if you build it, they will
come became popularized; this mentality is especially true
in startup culture. However, growth is actually driven by
marketing in most cases. Internationalization is an important
tactic for growth. Facebook, after it had expanded to high
schools, grew to 50 million users and hit a wall. When you
strive for internationalization, you need to build slowly to
move fast. When Facebook tried to scale to other countries
it created a community translation platform so users could
translate the site. Furthermore, they built for what the
world would become, not what it was when they were
starting out. Finally, community allows for virality.
Virality stems from three things: payload, conversion
rate, and frequency. How many people can you hit with any
given viral blast, how many of those people can you convert,
and how often can you do it? Hotmail is one of the prime
examples of viral marketing. They couldnt afford regular

48
advertising but they decided to add a link to the bottom of
every email sent on their platform: Sent from Hotmail. Get
your free email here. The payload was really low because
you only email people one at a time, but you do so frequently.
PayPal used eBay as their engine for viral growth.
They gave away money on the consumer side which
definitely attracted people, but they got sellers on board by
saying PayPal would be able to send them money from
purchasers. They had a high conversion rate for both sides.
Note that frequency and conversion rate are related.
If you hit someone with the same ad over and over, they
become annoyed and indifferent. The more times you send
the exact same message, the less likely people are to convert.
A great way to get virality is to import users contacts.
You want some percentage of those people to click through
and sign up. If you have a ratio of each user bringing in at
least 1.1 other users, youre now viral. Again, without
retention, this is useless.
With SEO, do your keyword research. Figure out what
people actually search for and optimize for that. Once you
know that, figure out how you can get links from high
authority websites in order to rank in Google.
Finally, when you want to get in touch with people,
dont send newsletters. A new user doesnt need the same
news as a power user whos been with you for a year. Focus
on notifications instead, and make sure theyre timely and
contextual. You want your outreach to be a magic moment as
well, instead of just spam.

49
 How do you make things that have passionate users?
How do you make your users unconditionally want you to
succeed, both in terms of product and company?
As we learned in the last chapter, growth is the
difference between conversion rate and churn. The gap
there indicates your growth rate. Instead of looking at this
mathematically, though, more founders should look at the
intimate, personal side of startups.
The best way to get to $1 billion is to focus on the
values that help you acquire your first user. Kevin Hale, a YC
alum and partner, originally founded a company called
Wufoo to build online forms. Its a database app that looks
like it was designed by Fisher-Price. Because it was easy to
use, customers from every market and vertical turned to
Wufoo. Eventually, the company was acquired by
SurveyMonkey with a ROI of 29,561%. Compare that to the
average successful startups ROI of 676%.

The trick was building a product that people could

love, one that they wanted to have a relationship with. In
that case, you need to look at new users as people youre
dating and existing users as people youre married to.

50
Relationships generate stories. People often talk about the
origins of their relationships; these are the word of mouth
things we say over and over. We do similar things with
companies because we are social, relationship-centric
creatures.
Therefore, first impressions matter in startups
because they color the users perception forever. The
threshold of pass/fail is so much lower with the first
interaction. You wouldnt date someone who picks their nose
during a dinner date but you wouldnt mind if your spouse of
a decade did it (at least, hopefully). Discover moments that
are memorable: the first email, the first login, ads, customer
support all of these are opportunities to seduce.
Wufoo had a dinosaur on their login which would
create a tool tip that said RARRR! if you hovered over it.
Thats how to make people smile. You need to think about
what is the emotion on someones face when they interact
with the stuff you make.
Lots of folks hate corporate personhood. With your
startup, you should show users that your company has a
personality that theyd love to get to know better. A social
network for wine lovers called Corkd had a poem as
instructions for its signup form. Flickr told people to Get in
there! on their login.
Stripe, an API payments company, doesnt have
software in the conventional sense. They simply allow you to
add ecommerce functionality to your site; they dont even
have a user interface in the conventional sense. But they
have gorgeous documentation and when they make
implementation examples, they tailor them to your account.
When Wufoo launched their API 3.0, they wanted to
host a contest to see who could build something awesome
with their product. Most companies give boring prizes, but
the team at Wufoo had a special affinity for Medieval Times.
They decided to give away a battle axe; obviously, people
wanted to talk about programming to win a weapon. Wufoo

51
ended up with 25 apps of quality that they could not have
paid for otherwise.

Dr. John Gottman of Seattle can watch a couple for 15

minutes and predict with 85% accuracy whether they will be
together or not, or divorced, in four years. With an hour of
observation, his accuracy is 94%. He discovered that people
fight about the same things: money, kids, sex, time, and
others (jealousy and in-laws). In Startupland, these correlate
to price, users clients, performance, uptime, and
competition and partnerships, respectively. When those
things go wrong, people will tell you.
Support-Driven Development is how you fix this.
Before launch, actions are divorced from their
consequences, but when you have users, you need to be
responsible, accountable, humble, and modest. This will
come naturally if everyone does customer support. Then the
people who build the product will have to support it.

52
 Gottman also found the four major reasons for
breakups: criticism, contempt, defensiveness, and
stonewalling. Criticism is when people arent focusing on the
specific issues at hand but on overarching issues that arent
easy to solve. Contempt is purposefully insulting someone
else. Defensiveness is not trying to be accountable, or
shirking responsibility. Stonewalling is shutting down
completely. People dont often mention this, but founders
and early employees will be doing customer support
constantly.
Theres a disconnect between our emotions when we
need help and the reaction of the helpers we talk to,
especially online because nonverbal cues dont translate to
the web. By asking people how they felt, the team at Wufoo
realized that people thought that their feelings about the
issues were just as important as the technical details.
Once people were able to let their emotions out, they
became more rational and a lot nicer to support staff.
Furthermore, theres a direct correlation between direct
user interaction and how good products get.

53
 A big thing that frustrates users is the knowledge gap,
or the difference between what they need to know to use
your app and what they actually know. Either you help give
them the knowledge they need, or you make it easier to use
your product. Theres no difference in increasing
conversions or decreasing churn in terms of growth, but
fixing churn is much easier to do.
Finally, Gottman determined that divorces occur
because the passion is gone. You need to prove your worth
for your users. Show, dont tell, them what youre doing to
make their lives better. Thank them for using your product.
Show them you care. Wufoo actually sent Christmas cards
one year and tried not to do that the following year; one
client actually sent an email asking if they had forgotten.
There are three ways to achieve market dominance:
best price, best product, best overall solution. Price-focused
companies have awesome logistics like Amazon. Product-
focused companies focus on research and development like
Apple. Best solution companies are customer intimate, like
luxury retailers and hotel chains. This method is the only one
which you can implement at any stage of your company.
Youve succeeded when your customers want to tell
your story, when telling that story makes them the most
interesting person in the room. You can do that by listening
to customers. Take feedback and iterate on it. You dont
even have to write it all down. Youll hear the most important
complaints so often that theyll be burned into your brain
until you fix them.
Finally, if you really want your whole team to get
behind user experience as one of the greatest goods, you
need to empower them. Consider a King for a Day model
where you randomly select some team member to lead the
company for a day or two and a) get to see from a different
perspective and b) work on tasks that otherwise might not
get done. Share your profits based on equity split or bonus
pool; thats a pretty clear incentive for employees. Above all,
do things that are lovable, especially for customers.

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 A company called DoorDash started building its on-
demand delivery network rapidly, after learning lots of Palo
Alto vendors didnt have access to a delivery infrastructure.
The founders posted PDF menus for local restaurants on an
ugly landing page and inserted a cell phone number so that
they could gauge true demand for this service.
All of a sudden, not having expected anything, they
got a phone call asking for Pad Thai. The next day, two more
calls, then five, then seven, then ten. Despite the fact that the
site was ugly and inconvenient, people were using it, which
meant the founders hit a real pain point.
They started off by doing things that didnt scale,
things that would never work in a large company. For
example, they delivered food themselves, answered all
support calls, used Square and Google Docs to collect and
track payments. They used Square so much for tiny
payments that they were shut down on suspicion of money
laundering.
By doing things that dont scale, you learn what
people want, what your processes should look like, and you
get great feedback. Most importantly, you can find your
product-market fit by doing things by hand. Test your
hypothesis. Launch fast.

Teespring is a company that allows people to sell

apparel without taking on the huge risk common to retail
apparel companies. When they first launched, the business
looked horrendous. They had to offer free designs and
revisions, launch the product themselves and do the social
media, all to sell fifty shirts to some nonprofit for $1000 in

55
revenue. Most observers wouldve said give up. At the
beginning of a startup, youll be terrible at selling a new
product. Youve never sold that product before and you
dont know the real pain points of customers. You dont have
success or testimonials to point to, so the first users will be
the hardest.
Its the founders responsibility to bring in the first
users. Founders will have to spend personal time and effort
to bring in those users themselves. Perhaps theyll need to
send 100 emails per day or call as many people as possible or
harass their personal networks. This is like pushing a boulder
uphill where the first few inches are the steepest, but over
time the incline levels out and eventually, youre pushing the
boulder down the hill so it rolls on its own.
The first two users will take lots of handholding,
personal love, and thats all ok because its essential.
However, dont give away product. If its actually valuable,
people will pay. Free is a whole different ballgame from paid
and free users can be really hard to convert to paid.
Once you finally have users, how do your turn them
into brand advocates? You need to delight them by being
exceptional. Just talk to your users, at first. It wont scale, but
that makes people feel special.

56
 The first way of talking to your customers is to run
customer service yourself. Your instinct will be to pass it off,
and thats because its painful to see so many users have a
terrible time with your company. It sucks knowing you sunk
so much time and love into something just to mess up and
ruin someones experience. But you have to do it so that you
know what to fix.

Next, you need to reach out to current customers and

churn customers (those who have left). You need to make
sure that youre not taking people for granted, so you have to
ensure people are consistently having good experiences.
When people leave, find out why. That personal touch can
make all the difference. When you show people you care, you
can bring them back. Even if you cant, thatll help you learn
how to prevent the same churn in the future.
Finally, you need to monitor your social media and
communities. When people have problems and talk about
them, you need to make them right. All it takes is one
complaint to ruin tons of momentum. Teespring sometimes
messed up on colors or sizes and instead of becoming
defensive, they had to bite the bullet and make it right. The
most frustrated customers become the biggest champions
when you can make them happy.

57
 Note that the product you launch with will not be the
one you scale. Your job is to progress and iterate to get to
market fit. Optimize for speed over scalability and clean
code. Teespring was about to lose two huge customers
because they were missing features the clients wanted. The
CTO literally duplicated all of their code to create a custom
platform for these two clients and ended up making a lot of
revenue. What initially wouldve taken a month only took
three days.
When you have one user, focus on ten. When you
have ten, focus on 100. Scaling and iterating should be based
on scales of magnitude; necessity is the mother of invention.
There will be huge pain points, technical debt, and regrets,
but youll be fast. Bumps along the way are just speed bumps.
No matter how fast youre going, though, do things that dont
scale until theyre ripped away from you. Customer feedback
will always matter.

When most people start up, they think about press as

something that happens magically. They think about
journalism as some meritocracy where reporters try to get
the best stories thats not the case.
When you think about press, think about who you
want to reach as well as your goals. If you dont have any
goals, you wont achieve anything with press. Aimless
coverage wont do anything for your company; you need
legitimate business goals.
Twitch, an ESPN for gamers, hoped to reach the
gaming industry. So they targeted industry trades and game
development blogs. Stuff the space was really reading.

1. Product launches, when you release a new version of

your app or hardware
2. Fundraising, when you raise angel or VC money
3. Milestones, when you hit a certain revenue target

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4. Stunts, where you do something weird or interesting to
get a story
5. Hiring announcements, when you hire someone really
famous or influential
6. Contributor articles, where you write some sort of
opinion or industry-related piece

At the end of the day, what you think is interesting is

not necessarily so for other people. You need to think
objectively about what you would read if you werent the
founder of the company. Journalists and bloggers are looking
for things that get pageviews.
Additionally, you only have to be original enough.
Think about your stories in the context of other things that
have been written, and if theyre novel enough or dont
overlap with recently covered topics, you have a good
chance of getting a write up.
To actually get your news in the press, talk to a lot of
people because some will inevitably reject your press. Its
best when you can get introductions to reporters who have
written about entrepreneurs you know. Once you get that
introduction email, you need to get in contact with the
reporter at least a week in advance of your launch because
they wont drop everything to cover you.
Try your hardest to get a face-to-face meeting or a
phone call because those are less forgettable than email.
Then pitch them; write out the big ideas of the ideal story
and memorize it (for in-person) or keep it in front of you
(over the phone). Structure your conversation to get them to
write your ideal story while making them think it was their
idea. Follow up a few days before your story goes out; send
an email including your launch time, any relevant videos or
photos, your name and your cofounders name. Remember to
say thank you.
PR firms can help you with contacts, but they dont
know what makes you interesting. Its your job to know why

59
your company is cool. Moreover, PR is expensive. Its just not
worthwhile for startups that are low on cash anyway.
In any case, press is great when you need to get a few
hundred or a thousand users, but the marginal benefit
decreases fast. You can only get covered so many times, and
eventually people get sick of hearing about you.
Finally, press is a relationship. Establish relationships
with reporters. Theyll help you put out breaking news and
counteract bad press. Then pay it forward to other startups.
Just tell the reporters about some potential leads you have;
it helps the reporter and your lead win, and then theyre
more likely to help you.
If youre interested in learning more about this, look
up Jason Kincaid and his Burned Out Bloggers Guide to PR.
Then read Trust Me, Im Lying which was written by a former
marketer at American Apparel.

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 How the heck do you raise money for your startup? It
can be really hard when you know little about the mechanics
of venture capital or angel investing. Consider the mechanics
of SV Angel, a Silicon Valley VC firm.
SV Angel has invested in 700 companies and talked to
thousands more. The first minute they meet founders, they
ask Is this person a leader? Is the founder focused, and
obsessed with product? Ron Conway of SV Angel often asks
what inspired you to create this product? That answer
should be based on a personal problem and this product
should be its logical solution. Additionally, can you
communicate well? If youre going to lead a team, you need
to communicate phenomenally.
On the other hand, Andreessen Horowitz invests
across stages in consumer, enterprise, and other companies.
Marc Andreessen states that VC is a game of outliers. Of
4000 fundable companies, 200 will get funded by a top-tier
VC and fifteen of those companies will make most of the
returns for most VCs that year. This is a feast or famine
business, so the question is:

61
 If the company has a good founder, idea, product, etc.,
youre just checking off boxes. This seems reasonable for
people to put money into. But with checkbox deals, your
company doesnt have something special; youre not an
outlier. You have a lack of weakness instead of a true
strength. Truly strong companies often have serious flaws,
but they excel on key value dimensions.
One of those strengths is clarity. When you meet an
investor, you should be able to say in one eloquent sentence
what your company does, so that the investor gets it
immediately.

Moreover, you need to be decisive. You need to prove

to investors that you hire and fire quickly, that you can adapt
to build a great team. Once you have product, its all about
team and execution.
For example, when it was founded, Wikinvest pitched
every VC in the valley and they all said no. One of the VCs at
Khosla Ventures said to the founders that since they werent
the Twitter guys, they had to make the pitch really easy and
have everything ready for the investors. Instead of taking
that into consideration, Parker Conrad flipped it on its head
and figured out how to become the Twitter guys.

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 To that end, he started Zenefits, online HR software.
That business seemed like one that didnt need any money at
all. It appeared that there was a path to enough cash flow
that it was compelling.
In reality, those are the companies that investors love.
You need to move the business in the right direction and gain
traction. If actions speak louder than words, traction speaks
louder than a pitch deck. When you have users that you can
point to or a healthy stream of cash flows, investors might
come to you, as in the case of Product Hunt. The key to
success is to be so good they cant ignore you.
Be mindful that being able to get funding doesnt
mean you should. Bootstrap for as long as you can. That way,
youre responsible for making your own money instead of
burning the money of investors and then owing them.
In any case, if you build a business that is going to be a
giant success, investors will give you money. A theory, a plan
and no data are a good recipe to get nothing. Youre always
better off making the business better instead of making the
pitch better.
While youre talking about your ideas, note that a big
issue in funding is founders asking for nondisclosure
agreements. That indicates to investors that youre
suspicious of them. The relationship between founders and
investors requires trust, and doing something like that early
on, if ever, will ensure that you dont get funded.
According to Andreessen, raising capital is the easiest
thing a founder can do. Recruiting engineers, selling to large
enterprise, achieving viral growth, and getting press and ads
are all a lot harder. Raising money is not true success; it just
puts you in a position to do all of the other harder things.
Founders dont understand the relationships between
risk and fundraising, and risk and spending cash. Andy
Rachleff of Benchmark Capital conceptualized risk as an
onion. That means that a startup has every conceivable kind
of risk and you can list them out:

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 1. Founding team risk- will the founders be able to work
together?
2. Product risk- can this team actually build product?
3. Technical risk- do they need some crazy tech
breakthrough?
4. Launch risk- will the launch go well?
5. Market acceptance risk- will the market like this
product?
6. Revenue risk- can they make revenue?
7. Sales risk- can this team sell and cover cost of
customer acquisition?
8. Viral growth risk- can this product grow virally?

A startup, in the beginning, is just a long list of risks,

and you focus on peeling away layers of risk as you go. You
raise a seed round to peel away the first two or three risks.
Then you raise a Series A to peel away some of the next two
layers. When you go to raise a round, you should be able to
say that you raised X round, achieved Y milestones, and
removed Z risks. Most founders just raise as much as they
can and hope for the best, but you need to be systematic
about how you raise and have a plan for deploying your
funding.
The most important thing for founders raising a seed
round is to pick the right seed investors because they create
the foundation for future fundraising. Theyll make the right
introductions and theres a huge difference between a
mediocre intro and a great one. An intro from someone a VC
trusts and respects has a much higher likelihood of panning
out for you.
Top accelerators like Techstars and 500 Startups will
do a great job at connecting you to the right investors. The
people that they recommend will probably be able to provide
the best introductions. Other people that you think are ok
but not as highly rated by your accelerator will probably turn
out to be less helpful.

64
 In the case of SV Angel, the investors look at thirty
companies to find one investment, and they do one
investment per week. That means theyre looking at around
1500 companies to fund just fifty. To end up with a better
chance at getting funded, get a warm introduction from
founders that the VC has invested in before. SV Angel takes
leads almost exclusively from its own network.
VCs will invest in two kinds of companies at the Series
A stage. The first case is when the company has raised a seed
round in the past. If you want a Series A, you need to raise a
seed; thats the way the progression works. The other kind of
company that can raise a Series A is one that has a serial
founder whos had success in the past. The first case is the
norm and the second the exception. The best way to capture
a VCs initial attention is to get referred through your
accelerator or your seed investors.
You need to figure out the sweet spot for your initial
capitalization. When Zenefits was starting out, they tried to
raise for a $12-15 million cap and people thought that was
crazy. However, changing the cap to nine million seemed to
generate almost infinite demand. The trick is to get as much
money as you need but not more, and to get the deal done as
fast as possible.
While youre getting funded, make sure ownership is
not demoralizing for the team. If you give up 40% in your
angel round, youve already doomed yourself. Youre meant
to give away 10-15% in an angel round or you wont have
enough left for yourself and your team. Some investors wont
even invest if they feel others own too much. Make sure that
you dont destroy your cap table.
When you do get funded, make sure you immediately
email the investors a reminder with all of the important
details. Take notes in your meetings and follow up, because
people forget things, and its useful to have everything in
writing.
At the end of the day, you want smart money
investors who have deep domain expertise and great

65
rolodexes; that will add a lot more value than just cash. If
youd take the persons advice without their checkbook, you
know you have a match. You can attract these people by
being really intense about analyzing your capital
expenditures and creating a very precise plan about funding
events, milestones, and cutting away layers of risk. This both
conveys operational excellence and helps you avoid the risk
of undue dilution.
When you finally have investors, remember that its a
marriage. You will deal with these people for five, ten,
perhaps even twenty years in conditions of stress and
anxiety. There will be tons of crisis board meetings and
everyone must be aiming at the same target. That is the only
way you can weather the storms that will inevitably appear.
When things are going well, you will have unlimited power
vis a vis your investors. When the company is in dire straits,
everything is subject to renegotiation. Thats why you need
to pick your investors like youd pick your spouse. And
finally, never ever ask for a nondisclosure agreement when
youre looking for funding. Investors hate that.

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 Now that you have a lot of the important, mission-
critical stuff in place, its time to talk about making this
endeavor sustainable. You do that by having a great, high-
performance company culture.
Culture consists of the core values and actions of
each member of the team in pursuit of the company mission.
Your culture is the set of principles upon which you make
decisions; its a way to align the team and create stability and
trust. Finally, a good culture allows you to retain the right
employees, and that helps you move faster.
What are the values that are most important to you,
and of those, what are most important to the business? Who
do you like working with and what are their values? All
values must support the mission in a credible way. At
Zappos, they wanted to create a culture of great customer
service. So they strove to wow people through service and
support employees, customers, partners, and investors
wherever possible.

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 Teams break down because they dont have trust.
With trust, you can have debates and conflicts and actually
generate better answers from those disputes. Without that,
you get groupthink and thats like the blind leading the blind.
When people commit, teams break down because
people arent held accountable. If thats the case, you wont
get results. You need to interview for cultural fit as well as
for skill, because people wont give their all unless they buy
in to your mission. To make culture stick, you need to make it
a daily habit. If not, you get out of shape and you get fat, and
then its much tougher to turn things around.
Lets look at the example of AirBNB to figure out
where culture comes in and how it plays a role in companies.
AirBNB was meant to pay the rent while the founders
pursued the big idea. Brian Chesky got lucky in that he found
partners that had intimidating talent. You need partners who
are so intelligent and skilled that they make you a little
uncomfortable; then you need to step your game up to be
with them. Founders are like parents raising a child.
Once you have a great product, you need to have a
great company to sustain the product. Companies that
endure have a clear mission with a sense of values. They do
things in a special way unique to them. Cultures are
intentional, they are designed. Cultures consist of behaviors
and values.
Years from now, behaviors and rituals will change but
the principles, the core values unique to your company, are
enduring. What is it that sets you apart, if you had to tell
someone? Those are your core values. While you strive for
diversity in age and background, you want homogenous
values. AirBNB came up with some core values, the first of
which is champion in mission. That means that the
company brings on employees who are there for the mission;
the mission in this case is creating a sense of belonging
anywhere and bringing people together.
Theres a story about two men laying bricks. Someone
asks the first man what hes doing. The response: Im building

68
a wall. The second man, when asked the same question,
responds: Im building a Cathedral. Theres a difference
between job and calling, and you want the ones with a
calling, the ones who champion the mission.

What you do and how you do it should be dependent on

why. Simon Sinek

Another value at AirBNB is frugality. When the

company was founded, they were funded entirely through
credit cards, so many that they needed binders to keep all of
them organized. The founders, clearly, were in massive debt.
However, they were providing housing for the Democratic
and Republican National Conventions in 2008. So they
decided to sell cereal: Obama-Os and Captain McCains.
That year, they made $5000 from AirBNB and $40,000 from
selling cereal.
The point of the anecdote is that necessity is the
mother of invention. Constraints bring out creativity. When
you raise tons of money, you lose some scrappiness. Its easy
to say you need to raise a certain amount or get a certain

69
contract when youre struggling. But when youre desperate,
its best to be scrappy and frugal. Be a cereal entrepreneur.
There are three hard things about culture. First, no
one ever tells you anything about it. Its a magic thing thats
all warm and fuzzy and there are next to no articles on it.
Second, culture is really hard to measure. Things that we
cant measure tend to get brushed aside. Third, culture
doesnt pay off in the short term so its hard to see the gains.
To overcome these issues, you need to first be very
clear about your core, unique values. Then hire people that
align with those principles. You should have unbiased people
just to interview for values and make sure that all hires care
about the mission.
The accelerator Rocket Internet created a clone of
AirBNB to try to take over the European market. Given that
they couldnt risk losing international markets, AirBNB had
to either acquire them or beat them. They decided not to buy
the clone because the employees seemed like mercenaries,
who just try to make a lot of money quickly, instead of
missionaries.

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 Culture ties into brand. Your brand evangelists will
probably be your employees; they create the connection
between you and your customers. The way to win customers
isnt to talk about whatever it is you do, its to talk about why
you do it. People want to know what you believe in. Apple
launched the Think Different campaign which basically
showed people what the company really believed in. If you
dont have a core value, youre a utility and those get sold at
commodity prices.
How do you communicate what you do to the outside
world? AirBNB started with forget hotels, save money but
moved to travel like a human. You should make people feel
special through your tagline but also through storytelling. As
the founder, you articulate the vision. You have to develop a
strategy and hire for cultural fit. If you can do that you have a
company that speaks for itself.
Culture to some degree resolves a bandwidth issue.
You code constantly in the beginning but youll never build
all of the features you want. You end up growing the
company and youll be less involved with decision making.
Culture is the invariant that you want to persist, as you
reduce the amount of decisions that you can get involved in.
So when you expand you need to find people who
would either do what you would, or do something better
than you would. You find those who share your values and
who are truly special. Quirkiness is a good measure of being
special; the people who are excited about many disciplines
and extraordinary at what they do are great team members.
The first ten people will be the most influential people
at the company aside from the founders. Recruiting will be a
hard slog through the mud. You cant just go on LinkedIn and
cherry pick talent. Your company is nothing, your target
hires friends will tell them not to join, and you have no
network to hire from.
The people youll end up hiring will be young or
somehow undervalued. You need to convince people to

71
make sacrifices to join you. Risk is exciting, which will attract
adventurous people. No smart person will expect this to be a
guaranteed win, but they will appreciate the fact that they
have an instrumental role in trying to build something
awesome.
Look at hiring like value investing; you want to bring
on someone that will become a lot more valuable as time
passes. Good team members will be genuine, relentless
driven, curious, and insanely detail-oriented. But no matter
what, you will never really know if someone will be good
technically and culturally until you work with them.
You need to interview in a way thats good for you;
that means that you dont recycle other peoples tactics. At
Stripe, they flew out an engineer to their office and spent a
weekend coding and looking over his shoulder to see if he
was any good. You can do that in any role that you arent an
expert in. The key, really, is to work with people before
committing to hiring them. When youre hiring these early,
critical employees, ask them what a mutual friend would say
about their strengths and weaknesses. That creates a sense
of social awareness and accountability. Then go validate
those answers by calling the friend and asking where this
person ranks in the people theyve worked with: the top 1%,
5%, etc?
When you finally get people onboard, throw them
into the deep end of the pool. Get them to go to meetings
and do the work that theyre going to do. Give them tons of
feedback to help them adapt. Make sure everyone knows
where the company is going.
The first hires are critical because theyll eventually
grow into huge leadership positions as the company grows.
By spending years immersed in the companys work and
culture, these people will develop their management skills.
You should give people a shot at leadership, so that you can
figure out whos phenomenal at it, and who never wants to
do it again.

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 When you grow your company, you should try to keep
teams as nimble and autonomous as you can. The startup is
then a collection of startups. You can decompose the
product into some basic components and then simplify the
management process by doing that. The best hires, when you
deal with increased complexity, will be referrals. At the end
of the day, the best way to scale culture is to create social
norms. Figure out whats acceptable and when, and then
people will have guidelines and rules to direct their behavior.
That helps culture grow when you have to manage tens,
hundreds, or thousands of people.

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 A lot of founders think going into the consumer space
is really cool, but enterprise software is a super cool space
that Aaron Levie, founder of Box, thinks you should work in.
A lot of factors are changing in the software world which
makes enterprise much easier to break into than it used to
be. The cost of storage is dropping dramatically; in the very
near future, free or almost free computing and storage will
enable to do us amazing things with software.
Look for a significant change in the underlying
enablers of an industry to determine whether it will change
significantly. In the case of Box, people needed a way to store
data in the cloud, and the costs of computing and storage
were decreasing, but no real solutions were on the market.
Box created Box.net to solve the problem.
The founders were in college and noticed that it was
insanely difficult, whether due to expense or infeasibility, to
share files. Schools would give about fifty megabytes of
storage (essentially one file), which would auto-delete every
term.

74
 Box had hundreds of thousands of signups month
over month because they launched for free in 2006, offering
one gigabyte of space. The issue was that Box had built too
many features that consumers wouldnt pay for, but too few
features for enterprise to care. At that juncture, they had to
decide which market to cater to.
Enterprise seems like a really scary space with tons of
competition. However, while consumer products have a
huge audience, you have to fight the constant issue of how to
monetize. You can either force people to pay for your app or
you have to make money from ads. Consumers spend $35B
annually on mobile apps and the global ad expenditure is
$135B. Going after $170B isnt too shabby.
Enterprise, on the other hand, has an annual IT spend
of $3.7 trillion. Huge companies dont care about saving
money, they care about increasing business. The consumer
has a small amount of cash that they try to conserve, but
enterprise users are trying to squeeze value out of tech.
Enterprise tech is really complex, has bad design, and
poor customer support. For an example, read How Bad UX
Killed Jenny. Selling software to corporate customers is even
tougher, because theres a complicated decision-making
process. Youre going to have to hire a huge, global staff and
some VP of Sales to move product. At least, thats how Aaron
Levie pictured enterprise.
Despite these misgivings, Box took scale, consumer
experience, and the DNA of their company to enterprise.
They decided that they would do everything the opposite of
what they thought enterprise would be like. They wanted to
find what changes in technology they could exploit to bring
Box to enterprise. Today, they have 240,000 businesses
using their software.
The big organizational changes occurring in the
modern enterprise space are important for anyone seeking
to start an enterprise company. The first is that most
application companies are moving to the cloud; instead of
on-premise computing, with all its redundancy, you can now

75
build on the infrastructure of Google or Amazon Web
Services. In the enterprise, companies have to move decades
of infrastructure to the cloud, which means it is open season
for enterprise startups. The world is moving to cheaper, on-
demand computing, which is a huge boon to startups. Your
customers will want to adopt new technology and your
barrier to entry is a lot lower. With software-as-a-service
and other enterprise models, you can sell to a two person
company or a Fortune 500 corporation.
Finally, the shift to mobile has created a lot of user-
led models. That means that users are bringing in their own
tech to work. You can build software for your target users
and sell to the enterprise when they need better control,
security, and scalability.
There are 3 billion people online. That changes how
the enterprise will market to their consumers. The
companies will have to find new ways of getting to their
consumers. Imagine what Lyft or Uber does to the
transportation business. How will taxis compete?

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 In todays world you can shop on your computer, from
your phone, in a store, and get deliveries as well. Thats
called multichannel commerce, and lots of retailers want it
but few are prepared for it. That means that you can step in
and provide better intelligence on customer behavior,
amongst other things.
In healthcare, institutions are trying to build more
personalized, predictive experiences that are adapted to the
individual. That means that you need to look at telemedicine
and concierge healthcare. How will different healthcare
providers get connected and share information? Those are
all areas where you can make a change.
Every industry is going through some changes and
you need to determine what tech will alter the business
model. Every industry is, these days, a tech industry and
every company needs to be a tech company. You need to
look for technology disruptions, no matter whether youre
consumer or enterprise-focused. Look for enabling tech or
basic trends that are reshaping how things are done.
In enterprise, you need to start small. You need to find
the natural niche where you can slip in between the gaps of
existing products. Take a sliver of a problem and give it great
design, make it simple. Go for small businesses and then
giants, but start small. This is low-end disruption at its finest.

77
 To build upon that, you need to find asymmetries. Do
the things that incumbents cant or wont do. If they care
about vertical integrations, go for a cross-platform solution
that lots of different customers can use. Incumbents wont
be able to pursue you. Look at incumbents cost structures
and figure out where they wont be able to follow you in
terms of economic feasibility.
Then, find the outliers within the customer
ecosystem. Find the customers that are working in the future
and figure out what they believe is missing. How can you
support emerging use cases? When you have customers on
the bleeding edge, you can create tech to help them get
ahead. Though you should listen to these customers, you
should synthesize their feedback into the best features for
their use cases.

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 Our society has this list of examples of classically
great founders: Jobs, Gates, Ellison, Zuckerberg, Bezos, etc.
We revere these people because they seem to have every
possible skill necessary to run a startup. We believe in the
idea of the founder as superhuman.

However, the founder is just a normal person who

deals with tons of headaches and, realistically, isnt super-
powered. Of course, you want some unique skills and a
unique solution to a problem, but those are likely not a
function of genius, unfortunately. You can become a great
founder by being mindful.

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 One way to deflate the myth of the super founder is
to look at teams. Usually, its best when there are two or
three founders, rather than someone flying solo. Multiple
founders encompass more skill sets and can compensate for
each others weaknesses.
People say that Silicon Valley aggregates tons of
incredible talent, which is true to a certain extent. However,
not everyone with talent can move to the valley. The thing
about great founders is that they will move if they need to.
They see the need to tap into powerful networks essential to
their task, and while some of those are in SV, many are not.
For example, Groupon made the great decision to start up in
Chicago where people look more kindly on startups which
have huge sales forces. The network in SV wasnt right for
them. Will you go where its most prudent?

Theres a tendency these days to say youre a

contrarian. Its easy to be a contrarian but very hard to be
both a contrarian and correct in your viewpoint.

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Contrarianism has to be relevant to an audience. What do
you know that other legitimately smart people dont know or
dont believe? Contrarianism encompasses other questions
as well. Do other people think you have a small idea which
you know is big? This whole contrarianism thing starts
raising lots of complicated questions then.
Should you be doing the work or delegating it? The
answer, paradoxically, is both. Youve got to be both flexible
and persistent. Stay firm against adversity. Get through the
tough things and get it done. On the flip side, you need to
listen to data and customers. Pivot if you have to. To figure
out when you need to do what, create a detailed thesis that
underlies what you do. Instead of thinking either/or, great
founders find a way to do both. Use data within the
framework of your vision as a guide.

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 Founders will have to grapple with tons of tough
questions. Should you be working towards a long term vision
or grappling with a local short term problem? Again, the
answer is both. You need to work on the things in front of
you as puzzle pieces to build the full vision.
How do you know youre a great founder? Its good to
be a) a good product person and b) a good leader. The key
thing is to recognize whether youre on track or digging
yourself a grave.
If youre a great founder, youll learn to cross uneven
ground. To do that, you need to fundamentally be able to
learn and adapt. You need to hold fast to your vision but
integrate feedback and input from all sources.
You need to be eloquent and coherent in order to
build a network. Without clarity, you cant assemble a group
of people to follow you. You wont have investors,
employees, fans, etc.
Good founding teams collaborate really well. They
cover diverse skills sets (technical and business and design,
for example) and have profound trust. The best founder
teams know how to learn collectively, synthesize answers,
and then attack and solve problems.
Finally, good founders know when to pivot. Theyre
willing to take a hard look at their investment thesis and
determine whether their confidence is increasing or
decreasing. Then they determine what works and what
doesnt and try to optimize. Founders dont have balance.
Great founders are so committed to winning that they put
everything into their venture.

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 Building a company is like building an engine. It looks
pretty and clean in theory, but in reality, it is a bunch of
ramshackle parts held together with duct tape. It takes lots
of work to hold the pieces together. Eventually, you can
construct a high-performance machine that doesnt need to
be policed constantly, but that takes effort.

According to Keith Rabois of Khosla Ventures, you

need to build a company that idiots could run. As a leader,
your job is to maximize output, or in another word, progress.
Motion is not progress. Everyone flailing their arms around
but not actually doing anything doesnt help.
When you first start out, it will be pandemonium, as it
should be. If youre moving at the right pace, there will be a
new problem or ten every day. Your goal is to manage the

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company like a hospital emergency room, by triaging every
issue. Dont worry about colds when you need to deal with
cancer. The trick is to determine which is which.
A great metaphor for the task of leaders is editing.
The first thing an editor does is take out a red pen and start
striking things. Your job, then, is to clarify and simplify
everything for the people in your operation. You need to
distill all of their tasks down to a few things that they can
repeat without even thinking about. If you can post your
thoughts in 140 characters, you can operate your company
in the same way. Take out the red pen and eliminate things.
The second thing editors do is ask clarifying
questions. For example, an editor might ask: do you mean
this? "can you give an example of that? and so on. Famous
CEO Andy Grove estimated that you could improve
performance by 30-50% with each step eliminated.
The third thing you do is allocate resources. For
example, in a journalistic operation, editors move journalists
around to cover topics of interest. So you need to be able to
tell your employees what tools they have at their disposal to
achieve some end. Your people can also come up with their
own initiatives, which is an even better outcome; then you
approve those initiatives. The end goal should be to use less
red ink in the future. If you use more next month than this
one, you have a problem.
The fourth thing you have to do is ensure a consistent
voice. Everything you create that faces the public should
seem like it was written by one person. Thats a complicated
task, and you might be tempted to do it yourself. While thats
ok initially, you should be training people to recognize
differences in voice. Your objective must be that everything
feels the same, which is almost impossible. Even Apple has
trouble achieving that; their people would tell you that their
internal recruiting tools dont feel like Apple products. But
the goal is to get as close to that goal as possible.
The fifth topic you must focus on is delegation. Just as
editors dont write content, generally, you shouldnt be doing

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most of the work. Instead, youre responsible for all of it
because its your job to parcel out the work so it all gets
done, quickly and correctly. Andy Grove discusses task
relevant maturity, the amount of times someone has done
the same task before. The more theyve done it, the more
free range you give them. The more novel the task is, the
more you monitor them. Fundamentally, these means that
you shouldnt have one management style, but rather adjust
yourself to varied situations and employees. If youre
recruiting a manager and look up her references, its totally
fine if half say she micromanages as long as the other half say
she gives employees a lot of responsibility.

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 The sixth issue you need to worry about is editing
the team. Nobody is going to be perfect. A great analogy for
this is ammunition and gun barrels. Most people are
ammunition, but really, you need barrels that you can shoot
from. A good barrel will be specific to your company with a
unique skill set that fits really well; in other words, these
people can take an idea from inception to shipping. You can
identify these people by allowing them to expand the scope
of their responsibilities more and more until they break.
Everyone has some level of complexity that they cant
handle. Wherever they break is the role they deserve. If you
see people going to other employees desks and they arent
direct reports, those people are probably trying to help.
Those are barrels.
People tend to spread out their efforts handling
problems they feel they can solve. However, its better to
have people focus on really tough, high impact problems.
People tend to work on the easier problems, which add some
value and help growth a bit, but theyre not game changers.
Try tracking what happens when people only work on one or
two things and exert all of their effort there.
When you want all of these things to work at scale,
you need to make things easy for employees. To allow them
to make decisions in the way that you would, you need to
build a dashboard. Simplify the value proposition in your key
metrics for success. What is success? What are the key
inputs? When 100% of your employees are using that
dashboard, you can be fairly certain that theyll be as
effective as you are.
Furthermore, you should be transparent. Everyone
should know whats going on. Discuss board meetings with
all employees, and even pass on the boards feedback. To
scale, you should create notes from every meeting and
forward them to everyone. That way, people will feel less
excluded, if at all. Some people push this even further and
allow everyone to see all emails and even compensation

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information. While that might be a stretch, it could be right
for your team.
Your next task is to measure outputs, not inputs. Be
wary of looking only at one key output, however. If you want
to mitigate fraud, your team will implement a bunch of risk
protocols, but your customer satisfaction will plummet. If
youre measuring fraud, measure false positives too. That
forces your team to actually innovate. You should measure
opposite things: hiring metrics and interviewer quality for
example. Finally, focus on anomalies. At PayPal, eBay power
users would write into their listings: pay me with PayPal.
Then the team at PayPal realized that they needed to create
an embeddable HTML button.

Your final task is to look at details. If you get all the

details right, you wont have to worry about getting a billion
users or making a billion dollars. Those are byproducts of
focusing on details. If everyone executes at the same level,
the whole team will achieve the optimal level of output. This
includes details that will never face the user. Steve Jobs
insisted that circuit boards in Macs had to be immaculate,
even though only Apple technicians could see them. When
you get rid of peoples distractions and worries, they become
high-performance machines.
Finally, you should strive to create a cult. Good
startups tend to have their own offices, which encourage
cult-like behavior. This makes you act and think in a unique
way, whereas a shared workspace might not. Furthermore, a
great office and culture helps with recruiting; you can watch
a company, pick up on little things, and predict a lot.

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 When youre making a critical decision, you need to
look at it from as many perspectives as possible. You need to
see from the point of view of the whole company. When you
neglect that, your decisions can have dangerous
consequences. Ben Horowitz of Andreessen Horowitz gives
four management cases as examples.

What happens when you have an executive

that you need to either demote or fire? This executive is
well-liked and hard-working but just doesnt have the
knowledge or skill set necessary for the job. Nobody wants
to tell this guy he cant have an A for effort and give him an F
for fired instead. A demotion seems neat: you keep the exec

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in the company and give him an opportunity to develop. This
also helps culturally because this guy is so well-liked and
respected.
It gets messy when you have to explain why someone
who isnt an exec has a lot of equity, relatively speaking. How
will other employees feel about this demoted exec having a
ton of stock? Moreover, will they respect him as much now
that hes lost his rank? You need to look at the issue from the
perspectives of all of the other employees, relevant
outsiders, the other execs, investors, and other parties. Ben
Horowitz goes into vivid detail into these sorts of scenarios
in his outstanding startup management book The Hard Thing
About Hard Things. The title refers to the fact that there is no
recipe for dealing with truly difficult management issues like
the one above. You need to fight through them and use your
best judgment.
A truly amazing employee asks for a raise.
You think that they asked because they feel they deserve it.
You want to retain them and be fair; you know they do great
work. So you give the raise and you think everything is bright
and sunny.
What happens, though, when other employees who
didnt ask for raises find out about the raise? These others,
who may be even more skilled than the employee with the
raise, will determine that whoever asks for a reward gets
one. These people think its unfair that you didnt evaluate
performance, and they might leave to go find more fair work.
But whats really going to happen is that everyone is going to
ask for out-of-cycle raises because they fear theyre missing
out on something they might otherwise get.
So what do you do? You have to be formal, shockingly,
in order to protect your culture from devolving into a bunch
of office politics. Ultimately, you need to formalize a process
for giving raises based on merit, not because people ask.
More importantly, you cant give off-cycle raises or make
exceptions to the process. The process makes people more

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comfortable because they dont feel the need to be
constantly on edge about what might determine a raise.

Most startup employees only have 90

days after they leave a job to exercise their stock options.
This requires that they have the money to cover the strike
price and the tax bill. Note that this is often more cash than
the employee has. That means that employees have to
choose between walking away from vested options or stay
with the company for the wrong reasons.
So in a case like this, you can look at the difference
between the 409A and preferred prices and see something
like a 10 million dollar gain. But what you might not know is
that the options will probably cost you 2.5 million dollars; if
you cant pony up within ninety days, you just lost all your
cash.
The reason that this policy is so common is because of
a law called APB Opinion Number 25. That law was in effect
until 2004; if you gave someone ten years to exercise
options, you could never exit because you had created
expenses tied to your stock price with those options. You
created a compensation expense that rises directly with the

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stock price. This meant that youd never be able to forecast
earnings.
When this employee leaves and cant afford their
options, they will tell everyone how you screwed them over.
That creates a huge reputation problem. Consider the
employee who stays. Whenever someone leaves, theyll ask,
Was that smart? Should I leave too?
When people leave and cant pay for their options,
those options come back to the pool where you can
reallocate them. But is that really a good decision culturally?
Secondly, losing all of your stock is a huge incentive to stay at
the company. You get to retain your talent, but you wonder if
theyre staying because of the golden handcuffs. That
employee might be a detriment if they stay.
You can fix this in two ways. The first is that you treat
employees in a really straightforward way. You give them
ten years to exercise their options and make sure they get
what you told them theyd get, regardless of how rich or poor
they are. Second, you can tell your employees that there are
two conditions upon which they make money: their shares
are vested and they stay until the company exits. Beyond
that, the company needs to be worth something: ten percent
of nothing is nothing. That creates an incentive to stay, but it
must be clear to employees that theyll be screwed if theyre
not in it for the long haul.
Horowitz goes on to describe the case of a
Haitian slave, Toussaint Louverture, which is somewhat
graphic. Haiti was one of the most brutal places to be a slave;
of the two million slaves brought to the sugar plantations of
the Caribbean, only 700,000 remained at the end of slavery.
A book describing the conditions that Louverture lived in
says, mutilations were common to deprive them of the
pleasures which they could indulge without expense. Their
masters poured burning wax on [them]. Burning them alive.
Roasting them on the slow fires Those were the conditions
Toussaint grew up in.

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 Toussaint developed a vision: to end slavery, to take
control of and run Haiti, and to make Haiti a world-class
country that could truly compete. To execute this plan, he
had to defeat the locals, beat the other countries that were
interested in taking control of Haiti, and create a stable, good
culture. Louverture did not allow his army to pillage or rape
because it would create a bad long-term culture. He worried
about the slave culture because people were so used to the
beatings and violence. To rectify this, he co-opted the
soldiers from British, Spanish, and French armies and made
them generals in his army.

When he came to the issue of slave owners, it seemed

obvious that he would kill them and do right by the slaves.

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But then again, he had no experience running a sugar
plantation. So he let the owners keep their land, ended
slavery, and forced them to pay their workers. He kept the
tax rate low to fund those wages.
Note that, by taking lots of perspectives into account,
Louverture led the only successful slave revolution in all of
history. He let plantation owners keep their land. He
defeated Napoleons army and had more export revenue
than the U.S. The thing to learn from all of these cases is that
you have to have the discipline to see decisions from the
eyes of the employees, partners, investors, and all other
parties. You need to show people a better way as leader. You
need to convert your enemies, and you do that by elevating
your mission and culture. You need to be so good that you
can attract people to your cause.

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 When you build things without talking to users, youll
end up with something you think is cool but that no one else
is willing to pay for. You need to talk to people to get where
you want to be. One way to cheat and not talk to many other
users is to build something that you are the target consumer
of. You already know what you want and need.
However, thats a limiting way to start a company.
Youre probably not representative of this huge class of
people that will actually pay for the thing you built and
wanted. A product without users will end up turning into a
side gig that goes nowhere.
At that point, you need to pivot in order to find a way
to become really big. Twitch, which live-streams video
games, initially started out as a reality TV show about
founder Justin Kan. To handle that pivot, the team at Twitch
conducted huge numbers of user interviews and created a
whole department to talk to power users. To do that, you
have to determine who the most important users are; figure
out who youre building the product for. We will illustrate
the above by analyzing an example.

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 Since this was initially a college course, lets look at
college students as target users for a new note taking
system. Clearly, you dont want to talk to all college students,
so pick a subset. Break down the students by area of study
and see how they vary in terms of their lecture notes. At that
point, we come across a problem. College students dont
actually have much money to pay for a better note taking
solution. It turns out that your note taking software would
be more attractive to college IT departments. You might
want to talk to parents, especially parents of college
freshmen. As we discussed previously, you need to look at
this from every possible perspective.
In class, Emmett Shear of Twitch physically conducted
an interview about note-taking with a student named
Stephanie. Emmett asked mostly about how Stephanies
current experiences with note-taking could be better, what
her current practices were, and why she did what she did.
That teaches you a lot about desires and consumer behavior.
They didnt talk about the content of the app at all. Features
dont matter in your first set of interviews. You should focus
on the big picture and determine whether youre attacking a
legitimate problem.
Note-taking might not be such a huge problem.
People take notes with pen and paper, Google Docs,
Evernote, OneNote, and more. There doesnt seem to be
anything really flawed with the current system aside from
some minor inconveniences. However, you should continue
to talk to people, up to eight, and figure out whatever new
information you can. More importantly, talk to as many
different people as you can so you can avoid bias.
Stephanie stated in her interview that she likes
Evernote for her personal notes but uses Google Docs to
collaborate. Based on that, how can you build one new
feature on top of Google Docs to make people excited? How
can you move them away from whatever theyre already
using and make them come to this Google Docs clone with
one extra feature?

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 You can argue that Stephanie uses Evernote because
she likes sticky notes thoughts and details. Google only has
documents but not smaller notes. So you decide that you
want to create a Google Docs clone that is collaborative but
can pull in the little detailed note-taking aspects of Evernote.
Will people really switch to this, though? If you can code,
throw together a quick and dirty prototype and see what
happens. On the other hand, you can validate this without
spending tons of time coding. Design a mock up of what your
app would look and feel like for users. Show them and ask if
theyre excited. Never ask about features.
When you determine what truly excites your target
audience, go find a shortcut way to hack together a project.
Hackathons are great for agile, quick and dirty development.
Instead of cloning Google Docs, go build an add-on or
browser extension that adds in your functionality.
If youre selling the product, get people to pay. If they
pay, youve created something good. Its the greatest validity
test you can put your product through. If you cant get
people to give up cash for it, theyre probably not excited.
You need to find peoples pain points and cure them,
at the end of the day. Talk to people who use your stuff and
see what they want fixed. More importantly, talk to people
who use competitors and see what pain points they have. If
you can build what they need, theyll switch. Truly, at the end
of the day, you need to talk to the party that will help you
expand the market. For Twitch, that wasnt the content
creators, but the non-users. Why dont they use any of these
broadcasting software options? The important thing isnt to
look at features; its to solve the issues that users face.
While data is useful, it doesnt tell you what
problems you need to address. If you invent without talking
to users, you will probably build something crappy. Users will
tear apart the ideas you have for features. Theyll be
concerned about totally different pains.
You want to figure out what is already in peoples
heads. Asking about features puts things into their heads

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when you actually want to extract things. Additionally, find
the people you need to talk to, not the ones who are
available. You want to avoid bias at all costs. Ultimately, you
need to figure out more about the problems you need to
solve.

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 What happens if, instead of developing software like
everyone else, you decide you want to make consumer
hardware? Thats a whole different beast. Hosain Rahman of
Jawbone says that the whole point is to help people live
better lives with technology. You can accomplish that by
finding the intersection of beauty and engineering.
Jawbone, though it existed before this trend arose,
attacks the internet of things. Thats probably a good area to
build hardware because smart hardware can generate
subscription revenue. Smart jet engines could charge based
on hours of flight time. Check out this piece by Tom Tunguz
for more. All these wireless smart devices are connected and
can measure things.

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 This world, however, is a bit of a mess. All these
devices dont talk to each other. Everyone talks about
wearable devices a bunch, and they seem like the perfect
context engine for everything around users. My thermostat
cant tell why Im hot or cold and my car doesnt know my
physical or mental state, but wearables could change that.
In order to do great work with hardware, you need to
know the full stack. That means that youre great at all sorts
of software, from the part that faces the client to the guts
that drive the application. You need to be awesome at
hardware engineering. Ultimately, if people dont wear your
devices 24/7, thats a failure.
If you succeed in creating hardware that people use,
you need to know what to do with the data you collect.
Without data, you cant build a device that knows whats
happening and can communicate that to the rest of the
world.
Hardware is a different space because its not agile
like software. You cant just iterate on hardware because it
costs lots of money to prototype. You need to be really
deliberate because if people dont buy your product when it
comes out, youre sunk.
The process of creation is very methodical. First you
explore and let your imagination loose for a while. Then you
validate your concepts, refine them, and finally build a
product. You iterate on it after you launch, which shows you
how much slower hardware development is.
In the exploration phase, you think about where the
world is going and what your strategy will be. What is your
brand and how do you disrupt? You need to build using your
knowledge and creativity. Then, when youre confident, you
prepare your concepts into a thesis that is defensible. You
collect data and determine your attack plan. To move to the
next level, you should think about whether youd give this
project angel funding. If you would, push onward.
The next phase is about whats possible. How will you
sell the user experience? When you find out what is

99
necessary, you decide that you will pursue this and bring it to
life. You then have to analyze the tradeoffs between physical
limits and imagination. You need to figure out what problem
youre solving and then determine how the heck youre
actually going to build it.
Looking at your work, you need to think about
whether youre delivering an amazing customer experience.
Where is your threshold for that? Furthermore, why are you
different from your competitors? How does this product fit
into your product roadmap? What will the software release
cycle be? When youve answered enough of these questions
and truly determined the value of what youre building, you
can move into the development phase.
In development, you bring the pieces together and
actually build your product. All the while, you have to
troubleshoot as you implement. Figure out what users think
(see Ch15: Use Somebody). Does the product you have
match up with what you envisioned? Have your users moved
you into a different direction? Then you try to adapt your
work to move in that direction.
You need to be detail-oriented. What can you do to
make sure your clients love your product? What are the little
innovations that catapult you from minimum viable product
to a truly lovable product? Youve succeeded when
consumers cant live without your product.
To get to that point, you need to develop what Hosain
Rahman calls category strategy. Jawbone realized that
consumer content and media had gone mobile. How do you
create a high quality, portable, mobile experience? How do
you solve the human problem and justify why your category
(in this case, smart speakers and headphones) should exist?
In the macro context, what is the value for the
company? Jawbone decided that speakers would provide
them entry into your home. Doing this well would allow them
to keep making awesome products and moving forward.
Your goal should be to provide wonderful user
experiences. Why are things magical to the user? The system

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needs to generate the sort of emotional connection that
people cant live without. Think about how people use
apparent minutiae and optimize them along with the bigger
things.
Lets look at Up24, Jawbones health tracking
bracelet. They wondered if they could take sensors and help
people better understand themselves. Have you ever
considered that some days you sleep ten hours and feel
terrible and others you sleep four and feel amazing?

The Ups goal was to provide that data in a contextual

way that helps users actually accomplish health-related
goals. Essentially, that data must be converted into
understanding so that Jawbone can truly guide peoples
behavior. Thats the framework for Up. Without context and
subsequent action, data doesnt matter. All of this is meant
to create an experience, like all of Jawbones products.
When you go to build hardware, you have to create
constraints. That pushes you to resolve problems in the
simplest, most elegant ways. Then you can find ways to
squeeze in secondary goals, oblique to the main goal. By
thinking that way, you can create a truly magical user
experience. Ultimately, that is what its all about:
experiences.

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 There are lots of legal and accounting issues that first-
time founders neglect. These are the sorts of details that
seem like they can be dealt with later but will cause
significant damage in the long run if neglected. To that end,
this chapter will focus on avoiding legal and accounting
trouble.
First, its important that your startup be a separate
legal entity from yourself. That means you need to form a
company. This will protect you from personal liability,
meaning that your personal assets arent on the hook if the
company has trouble down the line. The best place to form a
company is Delaware (as long as you dont live there),
because you dont have to pay state income tax, among other
reasons. Furthermore, investors prefer to invest in Delaware
companies.
You can choose between various legal entities to
structure your startup. The typical form for a startup is a
corporation, which both absolves you of personal liability
and makes it really easy to accept investment and create
stock option plans. On the other hand, limited liability
companies (LLCs) are really good if you dont intend to raise
money for the foreseeable future because you only have to
pay one set of taxes.
Consider the example of a recent YC company was
formed as a Connecticut LLC. The founders eventually
decided to switch over to a Delaware corporation but the
lawyers made a very simple mistake. That mistake was
uncovered later and the founders realized that they were
never converted to a Delaware corporation at all. To actually
resolve the mistake, the startup had to hire four law firms
and racked up a bill of $500,000. Thats why legal matters.

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 Well focus here on Delaware corporations because
most startups need to fundraise. Once youve decided on
that, how do you set it up? You first send relevant
information to the Delaware Secretary of State, which
creates a shell of a company. You then need to create by-
laws and appoint the officers (CEO, President, and
Secretary). You also need to create an intellectual property
assignment agreement so that any individuals IP will belong
to the company.
You can use a law firm to get set up, but most YC
companies use a company called Clerky, which creates very
general legal documents. Your paperwork is really important
so you must safeguard your signed documents. These will be
crucial during the stressful times in a startup and if you dont
know where this stuff is, youll make a stressful situation
even worse.
Next, you need to determine equity allocation. If
youre a solo founder, you can skip this. But for teams of two
or more, this is crucial. Ideas are a dime a dozen, but
execution is valuable. Therefore, the person who has the
idea shouldnt get some insane amount of equity unless
theyre also putting in an insane amount of work. Whos ever
heard of a billion dollar payment for an idea?

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 Generally, the equity should be near equal. If
ownership is not somewhat proportionate, investors will
worry that the founder team is out of sync. In high valuation
companies, the equity is rarely if ever significantly
disproportionately split.
When you finally divide the equity, you need to sign a
stock purchase agreement. You as an individual buy the
shares from the company. If you, then, do not file an 83(b)
election and have proof that you sent it to the IRS, you can
get into a lot of trouble for tax reasons. This happens
because your equity is going to vest over X number of years
and it can affect both your taxes and the companys taxes.
Vesting is the process by which you get ownership of
your equity over time. If you leave before all of your shares
are vested, the company can reclaim the unvested shares.
These unvested shares must be purchased by the company
to be reclaimed; you can just give a check to the leaving
equity holder for the amount they paid for the shares.
Generally, people do a one year cliff and a four year vest.
That means that, if you leave within a year, you get no stock.
If you leave after a year, you own 25% of your stock with the
rest of it vesting monthly until the four years have elapsed.
Vesting aligns incentives among the founders because it
makes them stick it out and grow the company.

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 What do you do in terms of paperwork when youre
fundraising? You can raise money with a set valuation or
without a set valuation (seed round). Not setting the price is
the fastest way to raise money, through convertible notes or
safes. Essentially, this means that the investor pays some
amount of money now and has the right to receive stock
equal to that amount when the price is set later on. At that
time, the investor is not a shareholder and does not have
voting rights. This unpriced round will come with a valuation
cap. This is best explained with an example. Consider an
investor who puts in 100k with a 5 million dollar cap. Later
on, the company is valued at 20 million. That means that this
investor can buy shares as if the company was priced at 5
million dollars (i.e. at a 75% discount). Thats their reward for
being in the company early.
When youre raising money, you need to understand
dilution. When investors buy shares, they decrease the
amount of shares that the founders will have. Thats
something to keep in mind as you raise money. Furthermore,
make sure your raise money from accredited investor; that
means that these people are sophisticated and know what
theyre doing. You dont want an investor who asks for their
money back later on.
Investors will generally make common requests.
Some investors want to be board members. These people
want to keep tabs on their money or perhaps believe they
can really help the startup grow. Be careful that youre
adding only people who are true value-adds.
Some people will ask to become advisers. If theyve
invested, they should be an adviser by default. You shouldnt
have to give anything extra in return for the advice. Any
investor already has skin in the game and should be looking
to help the startup in any way possible. Asking for something
more is just looking for a freebie.
Some investors will ask for pro-rata rights.
Essentially, that means an investor who owns 3% in one
round is allowed to purchase more shares to keep their

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ownership at 3% in future rounds. While that prevents
investors from getting diluted, it results in greater dilution
for founders.
Finally, investors ask for information rights. That
means that they want you to be contractually bound to give
them company information. Honestly, giving information and
updates is probably beneficial. Just make sure investors
dont overreach and ask for weekly updates or something
like that. That might indicate a lack of trust.
Now that you have money in the bank, you cant just
go spending it on anything you want. Remember that the
company is a separate legal entity and that its money is not
your money. If an investor asks what you spent her money on
and any of the line items on that expense list would
embarrass you, its not a business expense. You need to keep
your receipts so that your accountants can determine what
counts as a business expense and what doesnt.
You need to employ the founders. Working for free is
against the law and it creates a company liability. Companies
have to pay payroll taxes. People can go to jail for blocking
their payroll taxes. Pay people minimum wage and keep it
simple. When founders break up (e.g. one of them gets fired
by the others) and they have outstanding wages, thats illegal
and they can use it as leverage to accelerate their vesting.
Paying people is a way to actually avoid risk. You can set
yourself up with something like Zen Payroll and resolve
these issues and others.
If you have to fire someone, do it quickly and
decisively. Dont rationalize that decision. Fire the person
with a third party present, and dont equivocate. Pay all
accrued wages and vacation immediately. When that
employee is gone, revoke their access to all physical and
digital systems. If they have unvested shares, repurchase
them right away. All of these details seem like they can be
glossed over, but they actually determine the life or death of
your company.

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 We, as a society, have a somewhat skewed view of
sales. Salespeople in our minds are amazingly eloquent and
charming or, on the other hand, con artists. Lots of founders
want to hire salespeople to move product, but at the end of
the day, its on the founders to sell product. When you talk to
your users, thats selling. As a founder, you have an edge on
any salesperson. First, your enthusiasm for what you do will
carry over into sales. Second, youre somewhat of an expert
on what youre building and the problem youre solving, so
you can definitely answer any questions that a salesperson
might blank on.

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 Most people in startups talk about the sales funnel.
The first part is prospecting, where you figure out who to
actually sell to. Then you move to the part of the funnel
where you actually try to sell the product. After figuring out
whos willing to bite, you close the deal and make revenue.
According to the diffusion of innovation curve put
forth by Everett Rogers, only 2.5% of users will try a brand
new product. These innovators are your initial target market.
The trick is to find these people, and to do that, you need to
makes tons of calls and see who picks up.
First, you should go through your personal network.
Second, you should go to conferences where your target
audience will be. Go to small conferences where you can get
the attendance list in advance and set up meetings with
people. Thats how you can meet early customers. You
should also write cold emails; here are some templates.
Essentially, you need to answer: who are you? What are you
doing? When do you want to talk? Thats prospecting in a
nutshell.
Next, you need to get people to take your calls. When
you finally get someone on the phone, shut up. Your goal
should be to make the other person talk at least 70% of the
time. Get inside their heads. Ask tons of questions so that
you can frame your product properly. A great sale, like so
much else in Startupland, is understanding the users
problem and finding the best way to solve it.
After you have that initial contact, you need to follow
up. You need to be unreasonable in your willingness to find a
way to close the deal. You need to close deals (either a yes or
no) as fast as possible. You cant get comfortable with
maybes because a maybe doesnt bring you revenue.
After you talk to a ton of people, your goal is to sign a
sales agreement (if youre selling to enterprise clients) or get
people to physically hit the purchase button. Generally, you
need to have some sort of sales agreement which both sides
lawyers will mark up and negotiate over. Dont worry about

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insignificant details here. Just remember the goal of getting
deals, validation, and revenue.
A trap founders can fall into is trying to close a deal
when the other party says theyll buy your product if you add
one more feature. Chances are, you build that feature and
theyll find another reason to pass on you. If you get into a
situation like that, sign a sales agreement with them that
forces them to buy if you build the feature they want. The
other thing to do is wait and see if more people want that
feature. If all of your users are asking for a feature, thats a
different story. You should build that, but avoid building
features that only one client wants.
You shouldnt do free trials. As a startup, you make
revenue or you die. Free trials seem like validation, but if
someone isnt willing to pay, how much progress have you
really made? Instead, you should say we charge X for a yearly
subscription. If you dont like it within the first thirty or sixty
days, you can opt out of the agreement.

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 How can you scale sales when you get to the point
where youre growing? To build a $100 million company,
what do you need to do? You can have 1000 people purchase
product at $100,000. You can have 10,000 people pay
$10,000. You can have 100,000 people pay $1000. Those
are the buckets that companies generally fall into. At the end
of the day, you need to set goals and then figure out what to
do to get there and how to do it. Be persistent and always
follow up.

When you pitch to anybody, regardless of whether

you want their money or not, thats marketing. You should
have a go-to thirty second pitch. If people are interested, you
can move up to a two minute pitch. The more time you spend
talking, the more likely you are to make a mistake or say
something people dont like.

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 The thirty second pitch is just three sentences. The
first sentence should be what you do, according to the Mom
test. If your parents wouldnt understand what you do in the
first sentence, edit it. Be super simple and get your point
across. The second sentence should be about how big your
market is. The third sentence should focus on traction. When
were you founded and whats your monthly growth rate?
How much money have you made? If youre pre-launch, tell
them how quickly youre hitting milestones in development.
The two minute pitch builds on the thirty second
pitch. You need to, first, explain what your unique insight is
into the market. What sort of advantage or knowledge do
you have that other people dont? You want the other person
to say AHA when youre done. Next, talk about your business
model in one sentence; how do you make money? Finally,
why is your team great? How long have you known each
other? Do you have a good balance of biz and tech
backgrounds? Are you working full-time?
After youve built all of that up, you have The Ask. You
need to know the technical terms for fundraising and exactly
what youre looking for. How are you fund-raising? Whats
the cap? Then you let the other person talk. Just remember
that fundraising does not equal success. Funding is
ammunition, but your team is the army, and its on you to win
the war.

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 Startups are a long road. The previous chapters cover
just the beginning; after all, this is the first 30%. This final
chapter focuses on what to do after you get moving.
First, lets look at management. You dont need
managers when youre under ~25 people; everyone just
reports to the founders. The hierarchy is totally flat, and very
productive. When you have 30+ people however, that might
not work. This is where you form a true hierarchy.

Each person has one manager that they report to.

Managers must know their direct reports and employees
must know their manager. Everything must be crystal clear
and simple. Management is not somewhere to innovate,
because you should focus on product innovation.

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 This is where a founders job changes. Before product
market fit, you strive to build a great product. When you get
into growth mode, you focus on creating a great company.
Founders face some common failures as they become
managers.
The first is a fear of hiring experienced VPs and other
senior positions. Early on, its a mistake to bring on super-
experienced people. But as you scale, its important to have
experienced leaders. When you finally bring on one of these
people and theyre great at what they do, youll notice that
theyll take over a huge piece of the business and just make it
work.
Second, people get into Hero Mode. That means
they want to lead by example and keep loading themselves
with more and more work when the company grows. Instead,
these heroes should take time to go recruit more people
rather than working themselves to the breaking point. Hiring
just before you need people is better than having a disaster
where you cant do everything you have to.
The third mistake is bad delegation skills. Most
founders just tell people to go and research a problem. The
founder then wants to make the decision and get the
employee to implement it. This is the Steve Jobs approach
and it doesnt work for most people. Instead, you should tell
the person theyre really smart and let them make the
decision on their own and bring it back to you.
Another big trap that founders fall into is failing to
stay organized. When you work on product, theres not much
to keep track of. When youre running a company, you need
to know why and how you do everything. Write it down so
that everyone can read it; this is you writing the law.
Additionally, founders seem to hate HR. But the
ineffectual, awful HR departments we see on TV are not
what startup HR is meant to be. Good HR consists of clear
structure, both hierarchically and for employee
advancement, as well as performance feedback.

113
 Good HR ties into compensation. You should create
compensation bands, where a mid-level designer is in this
range and a senior engineer is in this range. This forces you
to be fair. Moreover, you should give lots of equity to
employees, even the later ones. This will dilute both you and
the investors, but the companies that do best care about
their people.
You should give out refresher grants to keep people
motivated. There are lots of different ways to structure your
companys stock grants. Some people do six year grants.
Some people do pyramid grants that give vest more the
closer they get to fully vesting. Continuous forward vesting
re-ups everyones grants for the same number of shares
every year. Get option management software in place,
because if you mess up on this, it could cost millions.
When you have over fifty employees, you need to
remember that you need to do sexual harassment and
diversity training. Be mindful of all of the HR rules you have
to follow. Its also important to do some diversity hiring. Its
really tough to fix the culture of an all-male engineering
department. Moreover, make sure that your people arent
burning out. Youre shifting from a sprint to a marathon.

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 You should bring on a recruiter to handle your hiring
process. When you go to make an offer, announce it
beforehand in your company listserv. Chances are your
employees know the person youre recruiting and can weigh
in. Finally, you should know when and how to ramp up new
employees. Will you give them a buddy or mentor to help
them learn everything they need to?
When you start growing the company you need to
acknowledge the feelings of your early employees.
Sometimes theyll want to become VPs. Sometimes that
works, but it might not. So you need to sit them down early
on and figure out where they see themselves going within
the company.
The above leads into the topic of alignment. To keep
the company productive in the long run, you need to make
sure everyone is on the same page. You need to make sure
that everyone has the same priorities and information.
Everyone should know what the road map is. A good test of
this is to grab 5-10 random employees and ask them to list
the companys top three goals. Youll probably receive
different answers, which means you need to reiterate the
goals over and over again.
Make sure you focus, despite all these new processes,
on delivering great products. You have to have transparency
and rhythm in the way you communicate. You should have
management meetings weekly and all-hands meetings
monthly. Sometimes, you should go on a retreat. Thats
important for preventing burnout.
Your intellectual property is really important to
manage properly. When you want to patent, you can only do
so within twelve months of announcing it. You should file
trademarks in all of the major international markets and grab
all of the relevant domain names.
You need to care for your own psychology. The highs
are higher as you succeed, but the lows get hellish. You go
from being a fan favorite and underdog to someone that gets
tons of hate. Make sure you take vacations and monitor

115
burnout in yourself. Think about how long youre willing to
fight this fight. Make sure you dont give up; dont let
yourself get to that place. Its a disservice to the team and
the company.
Marketing isnt tough. Dont hire a PR firm. Go make
relationships with journalists and handle it yourself. The
founders should always figure out the key message instead
of outsourcing it. This is also the time when business
development matters. To succeed there, you need to
develop a connection with the target party that you want to
partner with or sell to. Make sure you have multiple parties
lined up to generate competitive dynamics. Be persistent
and go out of your comfort zone. Finally, ask for what you
want, even if it feels aggressive.
Now go forth and conquer!

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 Clearly, startups are a lot more complicated than
mass media makes them appear. Startups are not all parties
and instant fame. They take lots of effort, mental toughness,
and ingenuity.
I hope this ebook has helped you learn more about
startups as quickly and effectively as possible. I did my best
to capture the key points from Sam Altmans How to Start a
Startup. Please note that credit for all the good stuff goes to
the brilliant people who lectured in the course. My
contribution was slimming all of this content down into a
form that can be digested in one or two sittings, or easily
referenced.
If you enjoyed this, please consider sharing it with
your friends. I think it would be awesome if we could help
spread some awesome knowledge from a group of truly
brilliant people. My hope for this ebook is that it reaches as
many people as possible and sheds light on what startups are
really like, instead of what the media paints them as.
Finally, if you have any feedback, please go post in the
comments section on the ebook website. If you come up with
really awesome edits or want one of your images removed,
Ill do my best to respond and incorporate that feedback as
fast as possible.
Now that youve conquered the first thirty percent, I
wish you the best of luck in surmounting the other seventy!
Id love to hear about your adventures in Startupland, and Id
be truly delighted to chat with you about your startup
dreams or realities!

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Moskovitz, Dustin, et al. "How to Start A Startup." CS 183B.
Stanford University, Palo Alto. Lecture.

Altman, Sam, et al. "Team and Execution." CS 183B. Stanford

University, Palo Alto. Lecture.

Graham, Paul, et al. "Before the Startup." CS 183B. Stanford

University, Palo Alto. Lecture.

Cheung, Adora, et al. "Building Product, Talking to Users, and

Growing." CS 183B. Stanford University, Palo Alto.
Lecture.

Thiel, Peter, et al. "Competition is for Losers." CS 183B.

Stanford University, Palo Alto. Lecture.

Schultz, Alex, et al. "Growth." CS 183B. Stanford University,

Palo Alto. Lecture.

Hale, Kevin, et al. "How to Build Products Users Love." CS

183B. Stanford University, Palo Alto. Lecture.

Williams, Walker, et al. "How to Get Started, Doing Things

That Dont Scale, Press ." CS 183B. Stanford University,
Palo Alto. Lecture.

Andreessen, Marc, et al. "How to Raise Money." CS 183B.

Stanford University, Palo Alto. Lecture.

Chesky, Brian, et al. "Culture." CS 183B. Stanford University,

Palo Alto. Lecture.

Collison, Patrick, et al. "Hiring & Culture, Part 2." CS 183B.

Stanford University, Palo Alto. Lecture.

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Levie, Aaron, et al. "Building for the Enterprise." CS 183B.
Stanford University, Palo Alto. Lecture.

Hoffman, Reid, et al. "How to be a Great Founder." CS 183B.

Stanford University, Palo Alto. Lecture.

Rabois, Keith, et al. "How to Operate." CS 183B. Stanford

University, Palo Alto. Lecture.

Horowitz, Ben, et al. "How to Manage." CS 183B. Stanford

University, Palo Alto. Lecture.

Shear, Emmett, et al. "How to Run a User Interview." CS

183B. Stanford University, Palo Alto. Lecture.

Rahman, Hosain, et al. "How to Design Hardware Products."

CS 183B. Stanford University, Palo Alto. Lecture.

Nathoo, Kirsty, et al. "Legal and Accounting Basics for

Startups." CS 183B. Stanford University, Palo Alto.
Lecture.

Bosmeny, Tyler, et al. "Sales and Marketing; How to Talk to

Investors." CS 183B. Stanford University, Palo Alto.
Lecture.

Altman, Sam, et al. "Later-stage Advice." CS 183B. Stanford

University, Palo Alto. Lecture.

*This bibliography deviates from standard MLA format to

put all of the citations in the order in which they appear
instead of alphabetical order by last name. Additionally, the
et al is included to cover any and all contributors for each
lecture, including certified Genius commenters.

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 There are a lot of people to thank for their help in
bringing this work to fruition. First and foremost, I need to
thank the team at Trendify. Eamon Cagney, Will Madaus, and
Justin Hegyi deserve huge thanks for their support of this
work, as well as their dedication to Trendifys mission. I
especially need to thank Jay Bhandari and Jake Haberman
for editing this over and over.
Next up is Pulak Mittal, formerly at YC, now at Clever.
Pulak, thanks so much for your work with the course and for
helping me edit the final draft of The First 30%. I appreciate
you putting up with my incessant nagging emails.
Third on this list are all of the wonderful folks at YC,
including Sam Altman and all of the partners and staff who
make YC such an amazing place. You guys made something
special with CS 183B and Im proud to be able to share my
version of your work with the world. Credit for good stuff
goes to you, of course.
Fourth, the lecturers who made this course so
amazing deserve not only my thanks, but the thanks of
everyone who watched, listened to, or read notes from
183B. Please dont sue me for repackaging and distributing
your stories :-)
To my parents and little sister: I hope Ive made you
guys proud. Thanks for your undying faith in me and my
endeavors. It means the world to me; I couldnt do it without
you.
To anyone that Ive missed, know that you played an
important part in this. The startup story is the story of
everyone who has felt an urge to create. So, to all of the
makers, dreamers, and doers, to the code monkeys,
marketing mavens, and UX ninjas, lets go build something
together!

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