Sam Altman, President of Y Combinator, talks about the first two topics of startups: Idea and Product.

Dustin Moskovitz, Cofounder of Facebook, discusses why and why not to start a startup.

Notes

Idea

• limit to how much you can figure out before getting product to users
• great execution of terrible idea is no good
• bad idea is still a bad idea
• ideas do matter
• idea definition: size and growth of market, growth strategy for co, defensibility
• if works out: 10 year commitment
• plans are worthless but the exercise of planning, is valuable
• don’t need to have everything figured out but nice kernel to start with
• someday need to build business that’s difficult to replicate
• idea first, startup second
• best companies are mission oriented: more buy-in: founders, employees, outsiders
• derivative companies don’t excite people
• best ideas often look terrible at first (“portal-less search engine”, “myspace for colleges”, “sleeping on couches”)
• idea that turns into a monopoly (start with small market, take over, and then expand)
• market that is going to be big in 10 years
• small rapidly growing market better than big, slow growing market
• can’t create a market that doesn’t want to exist
• Sequoia Capital’s question: Why now? why couldn’t it have been done 2 years ago and why will 2 years from now be too late?
• best if building something you yourself need, or else get close to your customer
• idea easy to explain otherwise it’s too complicated
• best ideas very different from existing companies in 1 important way or totally new
• clones usually fail (x for y, social network for pet owners, etc.)
• college good environment for meeting cofounders

Product

• product = anything that interacts with customer (including customer service, etc.)
• great idea leads to great product leads to great company
• top tasks: sitting in front of PC, talking to users. (not: raising money, business dev, getting press)
• build something users love; talk to users
• easier to expand from product a FEW people love to A LOT of people love than from product that a lot of people LIKE to a lot of people LOVE.
• growth by word-of-mouth when people really love your product
• over the long run great products win
• start with something simple (even if your eventual plans are complex) because it’s hard to build a great product
• do one thing extremely well
• founder being fanatical; feel physical pain over problems with products
• recruit good users by hand in the early days (not Google AdWords)
• do things that don’t scale: http://paulgraham.com/ds.html
• build feedback engine (user feedback > product > show it > repeat)
• gotta do sales and support yourself in early days
• metrics: measure right things and those will grow (see Lean Startup book)

Why start a startup?

• much stress
• 10 year commitment if a success
• 5 year commitment if a failure
• can’t quit as founder
• Boss – everyone else is boss
• Flexibility – always on call, you’re role model, always working
• not same as small business entrepreneur
• myth: you’ll make more
• employee: dropbox ($10B -> $10M) facebook ($200B -> $200M)
• founder: uber pet sitting ($100M -> $10M); über space travel ($2B -> $200M)
• myth: you’ll have more impact
• can have just as big or bigger at late stage company because of team, distribution, tech
• why do it: can’t not do it; right person to do it; got to make it happen
• you need to do it; you’ll need passion
• the world needs it; the world needs you

Additional Reading

• Advice for Ambitious 19 year olds by Sam Altman
• Good and Bad Reasons to Become an Entrepreneur by Dustin Moskovitz
• Transcript

Series

• Next: Startup Teams and Execution
• About Series: How to Start a Startup