How to Start a Startup: Lecture 2 – Team and Execution

Presenter: Sam Altman

Team

  • Cofounders/cofounder relationships
    • Don’t choose a random person you don’t know
    • It should be a person you have a history with (preferably for years)
    • It is better to be a solo founder than have a bad cofounder (and they only founded 1 in 10 solo teams)
    • Relentlessly resourceful: Paul Graham coined the model of James Bond
      • You need someone who behaves like James Bond more than you need someone who is an expert in some particular domain
    • Your cofounder should be
      • Tough
      • Calm
      • Technical
    • 2 or 3 total cofounders (5 is too many)
  • Try not to hire
    • Too many employees creates a high burn rate of cash
    • How much can you get done with a small # of employees – try to stay small as long as you can.
    • Goal should be not to hire
    • AirBnB took 5 months before they hired their first person
      • They had a list of several character traits and values that they believe in
      • Make sure you hire for a culture
      • The first 50 employees at AirBnB feel like they were the ones that founded the company. You want to create that culture/level of ownership.
  • Get the best people
    • You need to convince them that your mission is the one they should be fighting for.
    • When you are hiring it should either be 0% of your time or 25% of your time.
    • Mediocre engineers do not build great companies – Steve Jobs on B-Players
      • You can get away with it in a big company, because they will fall through the cracks. In the early days you cannot screw this up.
    • Sources of candidates: people you already know and personal referrals. Typically for the first 100 employees.
      • Personal referrals are the trick to hiring
    • Experience – matters for some roles and not others
      • A lot of early roles, experience doesn’t matter
      • Large scope management roles, etc. does require prior experience
    • 3 things to ask yourself when interviewing- if you get a yes to all three, you will never regret the hire:
      • Are they smart?
      • Do they get things done?
      • Do I want to spend a lot of time around them?
    • Call references and ask them questions like:
      • What specific projects did they work on
      • Are they in the top 5% of people you have ever hired?
      • Why aren’t your trying to hire them back?
    • More points for hiring
      • Good communication skills
      • Manically determined/should be comfortable with risk
      • Pass the animal test (Paul Graham)
        • you should be able to describe any person as an animal at what they do
        • You need unstoppable people
      • Would feel comfortable reporting to them if the roles were reversed
    • Employee Equity
      • You should aim to give 10% of the company to the first ten employees
        • If they are successful, they will influence the company way more than that
        • Normally founders give too much equity to investors and not enough to employees. Employees are the ones that actually build the company over the years.
      • The YC companies that have been generous with equity to employees typically are the most successful.
  • You’ve hired the best – now keep them around
    • Learning a little bit of management skills goes a long way
    • It is not always natural for the founder to give away praise
    • You need to learn to give your team credit for everything that happens and own all of the bad stuff.
    • Realize you are not going to be a very good manager and try to over-compensate for that
    • 3 things that motivate people to do great work (Dan Pink)
      • Autonomy
      • Mastery
      • Purpose
    • Focus on-one-on ones and clear feedback
  • Fire Fast
    • One of the worst parts of running a company
    • It is better for the company and the employee to fire fast
    • Fire if:
      • People are bad at their job
      • Are persistently negative
      • Create office politics
        • These last two are completely toxic to a company
    • If someone is consistently doing things wrong, they need to go. In practice, there is often never any doubt about this.
    • When should cofounders decide on the equity split?
      • As quickly as possible
      • It should be pretty equal
      • If it is not equal, you need to think hard about whether you want them in your company
    • Cofounder vesting is a must- The normal stance is that it takes 4 years to vest cofounder equity (linear scaling of 25% per year). If you don’t the other founder will be dead weight.
      • You need to talk things through early to try to avoid that
    • Really good people can almost always find a place in the company. Even if their role gets a bit out of the initial scope.
    • It is better to lose some initial customers than to hire the wrong people
    • Co-founders in different locations – don’t do it

Execution

  • Everything in the startup becomes modeled after the founders
    • Hard working
    • Execution machine
    • Driven
  • CEO has five jobs
    • Set the vision
    • Raise money
    • Evangelize the company
    • Hire and manage
    • Making sure the entire company executes (setting the execution bar)
  • Can you get it done?
    • Focus
      • What are you spending your time and money on?
      • What are the two or three most important things?
        • Say no. A lot
        • Set overarching goals. Repeat them
        • Communicate – you cannot be focused without good communication
      • You have to work really hard on the RIGHT things
      • Everyone in the company should know the key goals
      • Maintain growth and momentum
        • Don’t get too excited about PR – you need to have a real product to live up to any PR hype
      • Work together in person
    • Intensity
      • Startups only work at a very intense level
        • The secret to startup success is extreme focus and extreme dedication
        • Outwork your competitors – even by a little bit to be successful
      • Relentless operating rhythm
        • “move fast and break things”
      • Obsession with execution quality
      • Bias toward action – you cannot be indecisive.
        • Every time you talk to the founders, they should have gotten things done
        • You need to break the project down into smaller projects
      • The best founders:
        • Quick -email response
        • Do whatever it takes
        • show up – “get on planes in marginal situations”
        • Don’t give up
        • Be courageous
      • Always keep momentum – you want your team to be winning all the time. A winning team feels good and keeps winning, a losing team gets demotivated and keeps losing.
        • If you are not winning, “sales fix everything”
        • Where can you get the small wins
        • When you lose momentum, small fights and disagreement starts to come up. if this happens you need to talk to your users.
        • Acknowledge out loud that things aren’t working, and you need to figure out how to fix them
      • Always keep growing – If you build a good product, it will grow
      • Set an operating rhythm
        • Shipping product
        • Launching new features
        • Reviewing/reporting metrics and milestones
      • “the competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time.” Henry Ford
        • Don’t worry about the PR from competitors

RG

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