How to Start a Startup Final Lecture – Closing thoughts and Later Stage Advice

Presenter – Sam Altman

Later Stage advice

  • Management
    • Establish structure – important around 25 employees
    • clear reporting structure
    • clarity and simplicity
    • Avoid temptation to have ‘coolness’ via lack of structure
      • but keep in lightweight
    • Mistakes
      • Being afraid to hire senior people – most founders do it later than they should
      • Hero mode – extreme leading by example and during yourself out
      • Delegating- not giving people enough responsibility
        • wrong way is to tell people what to do
        • better way is to say you trust them to come up with the decision using your judgement and this is what I think.
      • Not developing a personal tracking and productivity system

      Codify how you do things (and why)

      • How you do things
        • in the beginning it is easy, when you are small you just decide how it is going to happen.
        • Write it down in a wiki or something and it will become law.
          • if you don’t, it will just be an oral thing that is passed from who the person shadows
  • HR – it is fine to ignore it at first, but it can speed you up
    • Have a clear structure
    • performance feedback – simple and frequent
    • compensation bands tied to performance. In the early days, it is whatever the person negotiates. Putting these bands in place makes it fair and standardized.
    • Equity – be generous
      • your investors will give you bad advice
      • distribute 3-5% per year
        • this dilutes you and your investors as you do this
        • the most successful companies give a lot of stock out to the employees every year
        • *do this with refresher grants
        • Structures – 6 years, pyramid vesting, continuous forward vesting
        • Get an option management system early
    • There are a lot of training/requirements once you hit 50 employees
    • Monitor for burnout
    • Hiring process
      • Full-time recruiters
      • Internal announcements – should announce every offer before you do it. a lot of people might know that person and have some feedback
    • New employee ramp-up
    • Diversity on the team
      • it is good to hire some diversity in perspective on the team early on. if you get this right, it will have a lot of benefits in the future
    • Growing past the employee base – hiring an engineering VP when you have earlier engineers that have been around longer
  • Company productivity
    • Productivity will go down the more people you have
    • The reason companies become unproductive is that they are not aligned or trying to undermine eachother
    • Clear roadmap and goals:
      • All employees can say they have the top 3 goals
    • Transparency and rhythm in communication
      • all hands meetings
        • go through the results and the roadmap for the entire company
        • roadmap
        • Offsites – take your best people to a cabin in the woods or something and talk about what they want to be when they ‘grow up’
    • Your goal is to create a company that creates enduring value over a long period of time:
      • Repeatable innovation and a culture of excellence as it grows
  • Legal, finance, accounting, tax
    • clean books, accounting firm, audits
    • collect your legal documents -easy to fix now if your missing something
    • FF stock in the B round
    • IP, trademarks, patents
      • you have 11 months to file for a patent or provisional patent after you have invented something
      • Trademarks, US and int’l
        • it is a good time to do it early
      • Grab all domains for your company, misspelling, etc.
    • Financial planning and analysis
    • Consider hiring a FT fundraiser (after B round)
    • Tax structuring (IP structured in Ireland?)
  • Your Psychology
    • It keeps intensifying
    • Ignore the haters – internet commenters, journalists, etc.
    • Long term commitment; long term strategy
      • since so few founders are committed to having a 10 year plan, the ones that do are at a huge advantage
    • Monitor burnout – take vacation
    • Focus – losing focus kills startups. When you are burning out, you will tend to do easier things. Focus is what made you successful in the first place
    • Ignore acquisition interest – don’t get demoralized by a low offer, don’t start any acquisition conversation unless you are ready to take a really low number’
    • Startups fail when founders quit
      • If you can manage your psychology in a way where you won’t quit
  • Marketing and PR
    • start thinking about this once the product is working, don’t ignore it
    • Don’t outsource key messaging
    • Get to know key journalists yourself
      • do not pick a PR firm
      • Pick 3-4 journalists that you establish a relationship with
  • Dealmaking
    • Build a great product
    • Develop a personal connection
      • it shouldn’t feel like a transactional relationship
    • Have a competitive dynamic – the way you get deals done is to have a competitive situation. “if you don’t sign with me, you you will miss out”
    • Be persistent!
    • Ask for what you want – most of the time you won’t get laughed out of the room and you might get it.


  • Most startups fail – how to fail gracefully. It is a very forgiving environment, be ethical be up front.
    • Be up front with investors, tell them early
    • Tell your employees before it fails
      • give them 2 or more weeks severance for employees
  • When to think about hiring a professional CEO – Never. Most of the time, if you don’t want to be the CEO of a company, you shouldn’t start one. You should want to build a great company.
  • If there is a certain market you are excited about, but don’t know a lot about, what should you do? Either jump right in and learn as much as you can OR go to work with a company that is in the industry and jump in from there.
  • When should a group of founders raise some seed money? Wait until you have the idea figured out, and need money. Once you raise money, you need to move fast and get out of the exploratory phase. Wait until things are working.




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