How To Start A Startup Lecture: How to Operate

Presenter – Keith Rabois

How to Operate

  • Operating is about how to deal with irrational people.
  • The manager’s output = the output of his organization + the output of the neighboring organizations under his influence
  • Simplify
    • Look at yourself as an editor- take a base product and keep cutting back the complexity
    • Don’t accept the excuse of complexity – everything can be simplified
  • Clarify
    • Keep asking questions until we really understand what we are working with
  • Allocate resources
    • As things get stale, change them up
    • You might want to allocate more resources to one area/project or another
    • Measure yourself on how much ‘editing’ you are doing. if you do a lot of editing and your job is getting bigger, you need to look at how to get the systems better
  • Ensure consistent voice
    • Everything should look like it was made by the same person: all packaging, all web pages, all documentation, etc. everything should feel the same.
  • Delegate
    • Any executive should not have one management style – it should be dictated by the employee depending on where they are on the delegation scale (above/below the waterline decision making)
    • Decision making process: Peter Thiel’s 2X2 grid have level of conviction on vertical, potential consequence on the X axis
  • Edit the team
    • “barrels and ammunition”  – the more people you have, the less you get done. Most great people are really ammunition, but what you really need is barrels. These are the irreplaceable people that can take an idea from conception to shipping and bring people with them
      • Barrels – start w/ a small set of responsibilities, then expand the scope of responsibilities until it breaks. Then keep them in that role. Keep testing people an pushing the envelope.
      • Watch who goes up to other people’s desks -even if they are not direct reports. Those are the people that are
    • Track the growth rate of the employees with the growth rate of the company.
    • Insist on focus – Peter Thiel said that every person needed to do just one thing right.
      • Most people will solve the smaller problems because they are not focused on that one important thing.
    • Metrics and Transparency
      • Simplify the value proposition and the company’s measure for success
      • Transparency
        • Metrics are the first step
        • Board decks shared with the employees after the board meetings + explain it
        • Create notes for every meeting involving more than 2 people so people could track what was going on
        • Every conference room has glass walls
        • Compensation transparency – it works in professional sports, there isn’t any real reason it shouldn’t be transparent outside of tradition.
    • Look at anomalies – anomalies will help point out interesting user habits and opportunities
    • Details matter
      • If everyone on the team executes at the highest possible level, the highest performance team will do everything that matters.
        • Things that don’t face the user – Steve Jobs insisted that the Mac’s circuit board
        • Give people good food, it make people good food: they won’t complain about it (distraction that prevents serendipitous interactions) and it is better for them.
        • Office environment – this is one of the most important things. It determines a lot about your culture
        • Laptops people use – they deserve to use the best possible tools to do the best possible job.
    • “every good startup is a cult” so shared working space doesn’t support that culture

Q&A

  • How to create street credibility for a new manager- only promote people that were kicking ass at their position. Promote the best engineer to the VP of engineering, etc.
  • Do a calendar audit of yourself – how much of your time are you spending on everything. Write down your priority list, then review your calendar. Match your resources to priorities.
  • How should a 1 on 1 work?
    • weekly or biweekly
    • should be driven by the employee, not the manager
    • 3-4 points that the employee wants to talk about
  • Ammunition/Barrel ratio – you need to have 1 barrel for every X (10-20) ammunitions. The natural tendency is to hire more people to get more stuff done. What you should do is measure the output divided by headcount and say that the ratio will be what you are evaluated on… This will encourage people to get their job done with the minimum number of people.
  • How often do you meet with Venture Capitalists – they meet every two weeks he sees the roll more like a psychologist (like walkabouts)
  • How do you harmonize ‘details matter’ with ‘only working on A+ tasks’ – the details matter activity should be a culture that is done in the early stage of the company, but it should scale and if the CEO has to keep on doing it, it is not in the culture yet.

RG

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Week 7 Reading: How to Start A Startup

The Information Age to the Networked Age: Are you Network Literate? -Reid Hoffman

The networked age is all about networks and relationships. It is no longer about the information age of looking for Job listings. Strong relationships where the flow of information is highly reciprocal can help you put yourself at the intersections of many key networks. There are three levels of network literacy:

  • Apprentice: using networked technology
    • Each level of literacy leads to more specific ways of using the network effects. Instead of saying you are the “executive chairman” he uses “Entrepreneur. Product strategist. investor” because his profile is targeted by entrepreneurs who may want financing. The LinkedIn profile headline is the first thing people will see about you in a professional context: Craft your network identity here (it should be bigger than your current position and company affiliation). Join the groups on LInkedIn in your industry or follow relevant companies and individuals within the domain of your industry.
  • Journeyman: establishing a network identity
    • In the networked age you need to be aware and actively reviewing networked-derived metrics of influence and authority: “who retweets our tweets? who comments on our medium posts? who shows up on LinkedIn as a 1 degree connection? You are no longer just you, you are: who you know, what you know, what they know about you, how they know you, who they know, and so on. As a journeyman, this thinking becomes second nature. Your network helps shape your identity too.
  • Master: utilizing network intelligence
    • Information proliferates faster now than ever before. The Master is able to extract the right information at the right time. If you are fully network-literate, your networks are probably your first reads vs. the typical news outlets (WSJ, NYT, etc.). There is an entire ‘dark net’ of critical-edge information that hasn’t made it into newspapers and blogs. The information that only exists in peoples’ heads. If you are fully network literate, you will know who the thought leaders, critics, and skeptics are in a particular domain. Remember that the strength of the relationship matters more than the quantity of them. them extremely informed individuals who are willing to share all that they know is more valuable than 1,000 people you know superficially. Networks are a two-way street. you need to reciprocate and add value to the network as well.

 

The Alliance: A Visual Summary – Reid Hoffman

  • The current employer-employee relationship is one built on dishonesty.
    • Employers are continually losing valuable people
    • Employees fail to fully invest in their current job because they are scanning the marketplace for new opportunities
    • No one is investing in the long term relationship
    • Companies cannot afford to offer lifetime employment.
  • The solution?
    • Stop thinking of employees as a family OR free agents
    • Think of your employees as ALLIES on a TOUR OF DUTY
      • An alliance is a mutually beneficial deal with explicit terms between independent players
        • The relationship needs to be based on how they can add value to each other
          • Employees invest in the company’s success
          • The company invests in the employees’ market value
      • A tour of duty is a specific, finite mission
        • it is an agreed upon ethical commitment by the employee and employer
        • A tour of duty has a specific mission with a realistic time horizon: “ship this product in 18 months”
          • It needs to promise specific career benefits for the employee “over the next 18 months you will develop excellent negotiation skills”
        • The paradox: “Acknowledging that your employees may leave is how you build the relationship that convinces great people to stay
        • There are 3 types of tours:
          • Rotational – entry-level employees. Example:2-4 year analyst programs
          • Foundational- People whose lives are fundamentally intertwined with their companies.  The company deeply informs the employee’s individual identity, and the employee has become part of the company’s intellectual and emotional core
          • Transformational – A personalized and negotiated one-on-one by you and your employee. The employee transforms his career by enhancing his portfolio of skills and experiences. The company is transformed by the employee accomplishing a specific mission that improves the business.
        • The Tour of Duty approach relieves pressure on you and your employees alike because it builds trust incrementally.
          • The relationship deepens as each side proves itself
          • The finite term means there is a set time frame for discussing the employee’s career
          • Both sides are open about their goals and time horizons leads to honest career conversations
            • necessary for building trust and loyalty with employees
          • It may seem like this tour of duty will give employees permission to leave, but this permission is not yours to give or withhold
          • If you really want your employees to stick around, provide them with a structure where they take on a series of personally meaningful missions.
      • Hoffman wrote a book called “The Alliance” where he discusses this topic among others

 

 

If, Why, and How Founders Should Hire a Professional CEO – Reid Hoffman

It used to be that once you hit a certain critical mass, a you would hand over the keys to your startup to an experienced CEO to scale the business. In the more recent startup climate this has shifted. What we are now seeing is CEO’s that stay for the entire growth cycle of the company – like Jeff Bezos, Larry Ellison, Steve Jobs, etc. There are three key ingredients that founder-CEO’s tend to have that this article talks about:

  • Comprehensive knowledge
  • Moral authority
  • Total commitment to the long term

Without these three key ingredients, a CEO’s won’t be able to maintain the rapid product innovation that is a prerequisite for success in today’s startup world. Despite this hypothesis, Noam Wasserman of Harvard Business School has been studying what he calls “the founder’s dilemma”, which has found that for startups in the 2000’s, founders maximized the value of their equity by giving up the CEO and board control. This leads us to the point of this article: you should ask “should I replace myself?” and if the answer is “yes” then “how do we make the transition”.

In his experience, to be successful you need to be passionate about the leadership, management, and organizational processes as the company scales. As a founder-CEO you have to want to do the nuts and bolts work that it takes and it is likely much different from the work you started the company for. At 50 people and beyond, a CEO has to focus on process and organization, and that wasn’t what he was passionate about. In addition to strong capabilities, if you are going to hire a CEO they need to have extremely strong alignment on their values, integrity and culture.

The role of CEO has changed in today’s climate. 20 years ago, the CEO didn’t have to be as focused on the product as long as the company was continuously refining it. The rise of the internet has caused the product cycles to go from months to weeks – so the CEO has to be heavily involved in the product (not just scaling). All successful Founder/CEO pairings have had 4 things true:

  • The decision to step back from being CEO is a function of self-realization
    • Not imposed by investors
  • The outside CEO was brought in early, so that he or she could play a real role in shaping the product, business, organization, and culture of the company
  • The original team of founders was a small group of two to three people making it easier to form strong co-founder bonds
  • The new CEO had prior experience running a large organization

 

 

The Information Age to the Networked Age: Are you Network Literate? – Reid Hoffman

This article is about pitching to VC firms. It walks through several Myths:

  • Myth: The startup financing is about one thing – money
    • Truth – a successful financing process results in a partnership that delivers benefits beyond just money.
      • Boost the strength of your network
      • Helps in recruiting employees and acquiring customers
      • Network intelligence, so you can prepare for challenges and opportunities ahead
      • When considering a VC, make sure they are constructive during the pitch and financing process. You don’t want to end up with ‘dumb money’
  • Myth – If your team is strong, show the team slide early in your pitch
    • Truth – Open your pitch with the investment thesis. You have the most of their attention in the first 60 seconds. Your investment thesis should be summed up in 3-8 points, then back those claims in your following slides to boost the confidence of those claims
  • Myth- All investment pitches have the same structure
    • Truth – decide whether you have a data pitch or a concept pitch
      • Data pitch – lead with the data because you are emphasizing how good the data already is (track record).
      • Concept pitch – there may be data but the data supports an undeveloped concept. Concept pitches present more of a promised future than data.
  • Myth – avoid bringing up anything that might paint your business as risky and decrease investor’s confidence
    • Truth – Identify and steer into your risk factors
      • Experienced investors know there are always risks. You will lose credibility if you don’t bring them up or can’t answer – you would be either dishonest or dumb. Identify 1-3 risks to your business and how you plan to mitigate them.
  • Myth – Arguing you have no prospective competitors is a strength
    • Truth – Acknowledge all types of competition and express your competitive advantage.
      • If you have no competition, you believe you are either playing in a completely inefficient market or no one else thinks your space is valuable.
      • Why are you going to break out of the pack? what is your advantage? If you cannot answer that question to the investors, the investors will not believe you have an edge that can lead to success.
  • Myth – don’t compare yourself to other companies because you think you are unique
    • Truth – pitch by analogy
      • For high level pitches, analogies work great. See the LinkedIn Series B pitch slide deck for the kind of examples Reid Hoffman used
  • Myth – Focus on today’s pitch. The future will take care of itself
    • Truth – think about the round after the one you are currently raising
      • Assume the series B investors will be interested in your Series A deck and same with the series C investors on the series B deck. In LinkedIn’s A slide deck he presented a growth curve that was good enough to get an investment but also one that he could beat. It gives legitimacy in being able to say “this is what I said before and this is what I did”

 

The 18 mistakes that Kill Startups – Paul Graham

Reality is, as Paul Graham puts it, there is only one reason startups fail: they are not making things that people want. Really this is the list of 18 things that cause startups to not making something users want.

  1. Single Founder – very few successful startups were founded by just one person. Why is this? It is a vote of no confidence – the founder wasn’t able to convince any of his friends into starting the company with him. Even if his friends are wrong, he is still at a disadvantage:
    • starting a startup is too hard for one person
    • You need colleagues to brainstorm with
    • to talk you out of stupid decisions
    • to cheer you up when things go wrong
      • Graham argues this might be the most important one
  2. Bad Location – there is a reason Silicon Valley is the Startup center – then Boston, then Seattle, Austin, Denver, etc. You need to understand why cities become startup hubs: thats where the experts are, standards are higher, people are more sympathetic to what you are doing, the people you want to hire are there, supporting industries, people you run into in chance are in the same business…
  3. Marginal Niche – If you are making anything good, you are going to have competitors, so you may as well face that. You can only avoid competition by avoiding good ideas. A good way to get around the mental block of not wanting to start something is to think about ideas without involving yourself: “what would be a great idea for someone else to do as a startup?”
  4. Derivative idea – most successful startups get their ideas from a specific, unsolved problem the founders identified. Not by imitating ideas from some existing company. Don’t look at Facebook and try to make a new spin that they missed, look at the problems they solved initially. What do people complain about? what do you wish there was?
  5. Obstinacy – Startups are more like science: you need to follow wherever the trail leads. Do not get too attached to your original plan because it is probably wrong. That doesn’t mean you want to switch to different ideas every week either – which can be equally fatal. A test you can use on ideas is to ask whether the ideas represent some kind of progression. if in each new ideas your starting from scratch, that is a bad sign. Also- ask your users for advice. if you think your going in a direction and users are excited about it, you might be on the right track.
  6. Hiring bad programmers – really a big issue for business people…
  7. Choosing the wrong platform – often chosen by bad programmers. A lot of startups during the bubble killed themselves by building server-based applications on Windows. This could also mean platform/program language. A trick you can use if you are not a programmer: visit a top computer science department and see what they use in research projects.
  8. Slowness in launching- all sizes of companies have this issue: software is always 85% done. It takes an effort of will to get something pushed through and released to users. One reason to finish the launch quickly is that it forces you to actually finish some quantum of work. Nothing is truly finished until it is released.
  9. Launching too early – while launching slowly is a MUCH bigger issue, it is possible to launch too fast. The key here is DON’T RUIN YOUR REPUTATION. What is the minimum you need to launch? Identify a core that is both (a) useful on its own and (b) something that can be incrementally expanded on the whole project. Then get it done as soon as possible. This is also a good way to write software: think about the goal and write a small subset that does something useful. Early adopters are fairly tolerant: they don’t expect a newly launched product to do everything, just has to do something.
  10. Having no specific user in mind – You cannot make something users like without understanding them. If you are trying to solve problems you don’t understand, you are hosed. If you do end up building something for users other than yourself you need to keep two things in mind: 1- you cannot rely on your intuitions – ‘you are flying on instruments’ and 2- look at the instruments
  11. Raising too little money – Startup funding is measured in time, every startup that isn’t profitable has a certain time left before the money has run out. Graham uses the metaphor of a runway – the end of the runway is the end of the cash. If you hit that point and you are not airborne, you are screwed. The definition of airborne could vary, usually you need to advance to a visually higher level: prototype, launch, launched, growth, profitability, etc. If you do take money from investors, you need to make sure you take enough to get you to the next step.
  12. Spending too much – the classic way to do this is by hiring too many people: it increases your costs and slows you down. There are three general suggestions about hiring: 1) don’t do it if you can avoid it. 2) pay people with equity rather than salary, not just to save money but because you want the kind of people who are committed enough to prefer that and 3)only hire people who are either going to write code or go out and get users- those are the only things you need at first.
  13. Raising too much money – there are a few pitfalls that you can hit: when you take a lot of VC money, you are expected to put it to work hiring people and spending it. More people will be less committed, and if you took too much money your company could ‘move to the suburbs and have kids’. The more people you have the more you stay pointed at the same direction. Also don’t spend too much time trying to raise more than you need. They advise founders to take the first reasonable deal they get. They could probably get a bit more somewhere else, but bargain hunting is a waste of time: startup investing is an all-or-nothing game.
  14. Poor investor management – founders need to manage their investors. Don’t ignore them, because they may have useful insights, but also don’t let them run the company – that is your job.
  15. Sacrificing users to (supposed) profit – the core problem in a startup is how to create wealth: (= how much people want something X the number who want it) not how to convert that wealth into money. The companies that win are the ones that put users first: Google made the search work, then figured out how to make money off o fit. While it IS irresponsible not to think about the business models, it is ten times more irresponsible not to think about the product.
  16. Not wanting to get your hands dirty – Most programmers would rather spend time writing code than getting users, but users are what makes an idea valuable. you need to make yourself do it.
  17. Fights between founders – about 20% of the startups they have funded have had founders leave. Where this is really a problem is when there are two founders and one leaves or if a guy with critical technical skills to the startup leaves. Most disputes are due to the people, not the situation. It is much easier to fix problems before a company is started than after.
  18. A Half-Hearted Effort – Should you quit your day job? Not necessarily, but he notes that if you believe so strongly in the success of the startup you, you are more willing to hedge your day job on it. Most startups fail because they don’t make something people want, and the reason most don’t is because they don’t try hard enough.

“In other words, starting startups is just like everything else. The biggest mistake you can make is not to try hard enough. To the extent there’s a secret to to success, it’s not to be in denial about that”

 

RG

How to Start a Startup Lecture- How To Be a Great Founder

Presenter – Reid Hoffman

Focus for this presentation

  • Founding Team – it is usually best to have 2-3 people on the team. When he looks at things as an investor, this is the best way to go
    • broad set of skills
    • more adaptable
    • can compensate for each others weaknesses
    • you need to have a high level of trust with your cofounders (not always, but frequently fatal)
  • Location- great founder seek the location and networks that allow them to be successful. Where are the strongest networks for this?
    • Silicon valley is good for some of those tasks
      • Groupon was NOT in Silicon valley, in the early days it needed sales forces to grow. They actually grew in Chicago.
      • If you were doing a fashion startup, it would probably make more sense to be in the networks that support what you are doing
  • Should I be Contrarian? It is pretty easy to be contrarian, it is more difficult to be contrarian AND right. Contrarian is relative to the audience – “what do I know that other people don’t know?” In the early days of LinkedIn, 2/3 of the people he talked to thought he was nuts. What HE knew was that he could leverage people that had interest in the initial market that would want to help grow the network effects
    • There are a lot of ways to be contrarian.
  • When should I Do the Work versus Delegate? Both…
  • Should I be Flexible or Persistent? You need to be both. You should have an investment thesis on why you think something you are working on is a good idea. Ask yourself if you are increasing or decreasing your confidence int eh investment thesis.
  • Should I be Confident or Cautious? You need to be able to hold a belief, but smart enough to listen to critical feedback, market, etc.
  • Should I focus internally or externally? Both – you need to balance and be flexible along these lines. It will vary daily.
  • Should I work by Vision or Data? Data only exists within a vision you are working through.
  • Should I take risks or minimize risks? You need to think about how to take risks, BUT part of the skillset of an entrepreneur is how to take focused and intelligent risks. If you are right about one thing, a lot of other things break your way.
  • Should I focus on the short term or long term? You should always have a long term vision in mind, but you need to focus immediate attention on the problem that is front of you. Ask “am I largely on path?”
    • Good strategy ‘path’
      • Product strategy
      • Product distribution
      • Financing
  • How do I know if I may be a great founder? General skills:
    • Product person
    • Leadership skills
    • Persuading people
    • Networks
    • Recognize whether you are on track or not
  • How do I evaluate if I am a great founder?

RG

 

How to Start a Startup Lecture: Building for Enterprise

Presenter – Aaron Levie (Box)

Launched Box in 2005 – back in 2004 it was really hard to share files. The cost of computing and storage had been dropping significantly. Internet was getting faster. The networks and browsers were becoming much more powerful. There were more locations and people to share with. They got funding from Mark Cuban, dropped out of college. They had a bunch of features that their consumers didn’t really need, but also not enough features that the enterprise wanted. They had to choose consumer or enterprise. In the consumer space there are really only two types of ways to make money: sell your product or service ($35 Billion market) OR you can sell advertising ($135 Billion market). Global enterprise IT is a $3.7 Trillion market. In the enterprise, the value equation is really different. They are not trying to get things for free, they want to make doing business more efficient and they will pay for it.

Challenges with enterprise:

  • Takes a long time to build the product
  • Expensive
  • Complex – the software that is out there is really complex and poorly designed
  • Sales take a long time before they even buy the software and even more to implement. You need to hire people to sell and support.

They decided they would only do enterprise if it could be done differently.

Everything about the enterprise has changed in the past 5 years:

  • Cloud computing vs. on-premise computing
  • Low cost computing
  • Standardized software vs customized software
  • Every business vs large enterprises
  • global vs regional
  • User-led vs IT-led
    • In an IT-led model, the incumbents will typically win
    • In a User-led model, the user drives the demand
  • 1.75B smart phones
  • 3B people online – every industry is changing
    • you need to ask yourself how startups are impacting your business model.
    • Every industry is going through huge changes due to the shifts above. Every company and industry in the world needs better technology to work smarter, faster, and more securely.

How do you get started??

  • Spot disruptions – Look for new enabling technologies that create a wide gap between how things have been done and how they can be done
    • What was impossible due to technical or economic feasibility that is now possible?
    • Example:
      • PlanGrid – a mobile platform that gets sent out to construction blueprints. Basically instead of the industry spending $4B in printing blueprints per year, they can update and upload to job sites.
  • Intentionally start small- Start with something simple and small, then expand over time. If people call it a “toy” you’re definitely on to something
    • Take a sliver of a problem and make it super simple. Expand out from there.
    • Incumbents will always go for the full solution, you fill a gap, then expand from there.
    • Example:
      • ZenPayroll fixed an issue people have with complex and crappy payroll systems for small businesses. As ZenPayroll gets bigger, they will be able to serve larger and larger companies
  • Find Asymmetries – do things that incumbents cannot or won’t do because it’s economically or technically infeasible for them to do them
    • Examples:
      • Go after the suite oriented incumbents- create something that is platform agnostic. (fishbowl inventory?)
      • Economically infeasible – where can you do something that no other software company is thinking of? Zenefits uses insurance company commissions to pay for their service.
  • Find the almost-crazy outliers- Go after the customers that are working in the future, but haven’t totally lost their minds (at the edge of their business model- Paul Graham)
    • Skycatch – enterprise drones (agriculture, oil and gas, construction) that allows them to survey
  • Listen to Customers – but don’t always build exactly what they are telling you. Build what they need.
    • Example
      • Palantir does this well
      • Modularize, don’t customize (salesforce)
      • Focus on the user – keep consumer DNA at the center of the product
  • Your product should sell itself – Sales should be used to navigate customers and close deals, not be a substitute for a great product.

Read these 3 books:

  • Innovators dillemna
  • Behind the cloud
  • Crossing the chasm

This is an amazing time to start an enterprise software company.

RG

Week 6 Readings: How to Start a Startup

What it’s like to work for Stripe – Alex Maccaw

Article about the culture at Stripe – which strives to have a very strong and open culture. There are a couple of key methods they use to achieve this openness and encourage collaboration:

  • Email – complete transparency: all emails are CC’d to lists of people that need to be kept in the loop on things. Every email goes either to the entire company or a particular team. This promotes collaboration, communication, but requires you to filter what you are subscribed to so you aren’t drinking out of the fire hose. The benefits are that it gives everyone a lot of:
    • perspective
    • insight
    • connectivity
  • All Hands – once per week, the company meets for an ‘All Hands’ where each team explains what happened in the last week and what they’re planning on for the next. This is all about transparency and communication. They also will address FUD at the end of the meeting, which stands for Fear, uncertainty and doubt. This is to encourage everyone on the team to think through how to solve the problems they have in front of them. Everyone is required to attend the ‘all hands’ meetings
  • Group Activities – They have specific group activities and meet ups that encourage people to get together at least once a day: lunch at the dining table, after work drink-ups, BBQs and parties, etc. They also have weekend hack-a-thons where they head somewhere offsite and hack away at one of the new Stripe-related projects.
  • Everybody does support- this is pretty common in tech startups, but the idea is that every single engineer does support on a bi-weekly rotation. Even the founders- This is one of the best ways to learn about the company, how everything works internally, and the customer’s needs.
  • Hackathons and capture the flag – Already talked about Hack-a-thons, but eh capture the flag is a series of challenges that involve exploiting security holes. These ideas were independent initiatives that were driven from within the company- not from the top, and they encourage that anyone can come up with ideas like this.
  • IM & IRC- Google Chat and chat rooms are as integral as email for internal communication. Instead of meetings they will have short chat conversations. They also have a bot that asks you what you are working on every 6 hours or so- then it displays it on some of the dashboards in the company. It gives people visibility into what people are doing.
  • Paper reading – Once per week a group takes a technical paper and discusses it over lunch
  • Induction – Stripe employees get to pick what their ‘dream machine’ (computer + monitor setup) would look like and they get it built for them. In their first couple of days, new hires spend a couple of days in each engineering group: product, systems, growth, ops, support. You get to meet people around the company, learn the codebase, meet everyone, etc.
  • People and teams – none of this would matter if Stripe didn’t have great people. Great people want and should get a lot of autonomy. Teams are small numbers of people who propose ideas and implement them. No managers, 31 total employees, each team is small and nimble. People are encouraged to be generalists.

 

How To Hire – Sam Altman

Hiring is one of the most important things a founder does. Most of them do not spend enough time on it. Sam Altman goes through some of his advice and pitfalls to watch out for in the hiring process:

  • Spend more time on it – after you have figured out your vision and get product-market fit, you should be spending between half and two thirds of your time on hiring. Great companies always have great people. Keith Rabois believes the CEO/Founders should interview every candidate until the company is at least 500 employees.
  • In the beginning, get your hands dirty –  you need to understand the role you are hiring for before you hire for it. If that means sales, you need to get your hands dirty on knowing what it takes.
  • Look for smart, effective people – It is easy to look for these people. Talk to the candidates about what they have done: most impressive projects and biggest wins, how they spend their time on an averaged, what they got done in the last month. Go deep in a specific area. If you don’t learn anything in the interview or if you are bored- these are big red flags. An interview should feel like a conversation, not questions and responses. Smart and effective people are adaptable.
  • Have people audition for roles instead of interviewing for them – Whenever possible (almost always) have someone do a day or two of work with you before you hire him/her. Have them sign a contractor agreement and pay them for this work like a normal contractor.
  • Focus on the right ways to source candidates – USE YOUR NETWORK: friends, friends of friends, friends of great employees and proven new hires… Often to get great people, you will have to poach from other companies. Don’t limit yourself to people looking for jobs. Hosting interesting tech talks can be good for technical hiring. Don’t limit your search to your geographical area, and use your investors and their networks to find candidates.
  • Have a mission, and don’t be surprised how much selling you have to do- candidates need to believe your mission.
  • Hire people you like – Stripe calls it the Sunday test: would you be likely to come into the office on a Sunday because you want to hang out with this person? You should also look for a diversity of thought.
  • Have a set of cultural values you hire for – figure out what your cultural values will be, then treat those values as articles of faith. You need to be willing to let an otherwise good candidate go if he is not a good cultural fit. Also avoid remote employees in the early days of a startup.
  • Don’t compromise – Go for the A-Players only. Great people attract other great people.
  • Be generous with compensation packages, but mostly with equity. You are going to have to pay for more ‘experienced’ people that will likely have a higher personal burn rate, but remember these people are not the ones that usually create great startups with the exception of a few roles that experience matters a lot.
  • Distributing equity to the first 20 employees. A good rule for the first 20 is typically going to be higher than what investors suggest: Altman says rough numbers are around 1.5% for the first engineer and about 0.25% for the twentieth, but there is a lot of variance in these #’s. Don’t break your normal compensation structure to get someone hired – it is typically a bad idea.
  • Watch for red flags and trust your gut – if you have a difficult-to-articulate desire to pass, pass
  • Always be recruiting – if you find someone that will be great for a role you won’t need until two months down the road, you should still hire now.
  • Fire fast – you will never get 100% of hires right, and typically founders will drag out the firing in the hopes that the hire will turn around. A bad hire can ruin a startup.
  • Put a bit of rigor around the hiring process – Make everyone on the team commit to a hire/no hire decision for everyone they meet. Make sure every candidate leaves with a positive impression of your company. Be organized, you should have the topics that need to be discussed outlined and prepared. Understand if you need unanimous consent on hiring someone and teach people how to interview.
  • Don’t hire – companies generally work better when they are smaller.
  • Hiring is hard – don’t forget that once you have people, you need to keep them. That means making sure they are happy and challenged, keep a sense of momentum at the company, check in with people, be a good manager, etc. Also, always be identifying and promoting new talent.

 

6 Principles of Influence – Robert Cialdini

I already wrote an entire book summary on this topic, but it is worth a quick refresher. The six principles of influence are:

  • Reciprocity – Think about the pervasiveness of free samples in marketing
  • Commitment and Consistency – if people commit to something either orally or in writing to an idea or goal, they are more likely to honor that commitment since they want to be congruent with their self-image. We also hate cognitive dissonance!
  • Social Proof – People do things they see other people are doing. If one person hits their brakes on the freeway, it might not mean anything. If you see three people hit their brakes at once on the freeway, you should probably slow down even if you do not see anything that would warrant it.
  • Authority – People tend to obey authority figures – even if asked to perform objectionable acts
  • Liking – People are easily persuaded by other people they like. Think about Tupperware parties…
  • Scarcity – Perceived scarcity will generate demand – “limited time only” sales

 

RG