I will summarize several great sources for this, all of which are from Y Combinator, the famed accelerator from Silicon Valley in California. Y Combinator is known for being the launchpad of AirBNB, Stripe, Doordash, Reddit, Dropbox, Coinbase, Instacart, Brex, Gusto, Twitch, Webflow, Sribd and about 3,000 others. According to Wikipedia, “Y Combinator was founded in 2005 by Paul Graham, Jessica Livingston, Robert Tappan Morris, and Trevor Blackwell.” Their personal contacts list and influence reaches from Reid Hoffman of LinkedIn fame to Mark Zuckerberg of Meta, essentially a who’s who list of the tech and startup world. If you have not already, I recommend reading Paul Graham’s essays.
Startup = fast growth
Regular growth means you’re just starting a small business.
The bets that win are non-obvious. You must present your hypothesis clearly to a potential investor. Three areas:
You need 1 or more of the below:
- A lot of people have it.
- Growing at 20% annually or more.
- It’s urgent.
- It’s expensive to fix.
- It’s mandatory.
- Frequently need to fix.
Behavior = motivation + ability + trigger (B=M+A+ T)
Your solution should provide the ability
Trigger -there’s an event that occurs or…
Your ability to maintain top of mind awareness
SISP – Solution In Search of Problem
GROKKET: Know this term! It’s a Y Combinator favorite and for good reason. People who have a solution for a problem they think exists rather than creating a solution for a problem they KNOW exists because they have collected the data to know for sure.
Must have at least one and it must be related to growth:
- Founder – Super expert
- Market – already exploding
- Product – 10x better
- Acquisition- 0$
- Monopoly- network effects and marketplace where the winner takes all
Here he outlines “beliefs” as
- Threshold – can they build it
Kevin Hale looks at how well you can do sales as the most important thing.
Lecture 1 – How to Start a Startup
Lecture 1 of Y Combinator’s Stanford lecture series titled How to Start a Startup by Sam Altman and Dustin Moskovitz. You can see a transcript of the entire lecture here on Genius.com.
Niche Down to Go Big
“As Peter Thiel is going to discuss in the fifth class, you want an idea that turns into a monopoly. But you can’t get a monopoly right away. You have to find a small market in which you can get a monopoly and then quickly expand.
It’s good if you can say something like, ‘Today, only this small subset of users are going to use my product, but I’m going to get all of them, and in the future, almost everyone is going to use my product.’”
Be Contrarian…and Right
“You want to sound crazy, but you want to actually be right. And you want an idea that not many other people are working on. And it’s okay if it doesn’t sound big at first.”
“I care much more about the growth rate of the market than its current size, and I also care if there’s any reason it’s going to top out.”
“Sequoia’s famous question: Why now? Why is this the perfect time for this particular idea, and to start this particular company. Why couldn’t it be done two years ago, and why will two years in the future be too late?”
Make Something People Want
“Your job is to build something that users love. If you get right, you can get a lot of other things wrong. If you don’t get this right, you can get everything else right, and you’ll probably still fail… always start with a smaller subset of the problem then you think is the smallest, and its hard to build a great product, so you want to start with as little surface area as possible.”
Founders are Fanatical
“The word fanatical comes up again and again when you listen to successful founders talk about how they think about their product. Founders talk about being fanatical in how they care about the quality of the small details.”
“You need some users to help with the feedback cycle, but the way you should get those users is manually—you should go recruit them by hand.
So get users manually and remember that the goal is to get a small group of them to love you.”
A Feedback Engine
“You want to build an engine in the company that transforms feedback from users into product decisions. Then get it back in from of the users and repeat. Ask them what the like and don’t like, and watch them use it… You should make this feedback loop as tight as possible.”
Lecture 3 – Counterintuitive Parts of Startups, and How to Have Ideas
Lecture 3 of Y Combinator’s Stanford lecture series titled Before the Startup by Paul Graham. You can see a transcript of the entire lecture here on Genius.com.
Your Instincts and Startups
“The first thing on it is the fact I just mentioned: startups are so weird that if you follow your instincts they will lead you astray. If you remember nothing more than that, when you’re about to make a mistake, you can pause before making it.”
Your Instincts and People
“You can, however, trust your instincts about people. So when you meet people who seem smart, but somehow distasteful, you think, ‘Okay this must be normal for business,’ but it’s not. Just pick people the way you would pick people if you were picking friends. This is one of those rare cases where it works to be self-indulgent.”
Startups and Users
“What you need to know to succeed in a startup is not expertise in startups, what you need is expertise in your own users.
Mark Zuckerberg did not succeed at Facebook because he was an expert in startups, he succeeded despite being a complete noob at startups; I mean Facebook was first incorporated as a Florida LLC. Even you guys know better than that.”
Don’t Play House
“In fact, I worry it’s not merely unnecessary for people to learn in detail about the mechanics of starting a startup, but possibly somewhat dangerous because another characteristic mistake of young founders starting startups is to go through the motions of starting a startup. They come up with some plausible sounding idea, they raise funding to get a nice valuation, then the next step is they rent a nice office in SoMa and hire a bunch of their friends, until they gradually realize how completely fucked they are because while imitating all the outward forms of starting a startup, they have neglected the one thing that is actually essential, which is to make something people want. We saw this happen so often, people going through the motion of starting a startup, that we made up a name for it: ‘Playing House.’”
Growth Hacks are B.S.
“Whenever you hear somebody talk about Growth Hacks, just mentally translate it in your mind to ‘bullshit.’ Gaming the system may continue to work, if you go to work for a big company, depending on how broken the company is, you may be able to succeed by sucking up to the right person; Giving the impression of productivity by sending emails late at night, or if you’re smart enough changing the clock on your computer, cause who’s going to check the headers, right?
There are only users and all users care about is whether your software does what they want, right? They’re like sharks, sharks are too stupid to fool, you can’t wave a red flag and fool it, it’s like meat or no meat. You have to have what people want and you only prosper to the extent that you do.”
“That brings us to our fourth counterintuitive point, startups are all consuming. If you start a startup, it will take over your life to a degree that you cannot imagine and if it succeeds it will take over your life for a long time; for several years, at the very least, maybe a decade, maybe the rest of your working life.
Starting a successful startup is similar to having kids; it’s like a button you press and it changes your life irrevocably.”
Confidence and Smarts
“Seriously it’s easy to tell how smart people are in ten minutes. Hit a few tennis balls over the net, and do they hit them back at you or into the net? The hard part and the most important part was predicting how tough and ambitious they would become.
There is little to no correlation between these attitudes and how things turn out. I’ve read the same is true in the military. The swaggering recruits are no more than likely to turn out to be really tough than the quiet ones and probably for the same reason.”
Coming Up with Startup Ideas
“But the short version is that if you make a conscious effort to try to think of startup ideas, you will think of ideas that are not only bad but bad and plausible sounding.
The very best ideas almost always have to start as side projects because they’re always such outliers that your conscious mind would reject them as ideas for companies.
How do you turn your mind into the kind that has startup ideas unconsciously? One, learn about a lot of things that matter. Two, work on problems that interest you. Three, with people you like and or respect.
What was special about Brain Chesky and Joe Gebbia from Airbnb was not that they were experts in technology. They went to art school, they were experts in design. Perhaps more importantly they were really good at organizing people in getting projects done.
If you think of technology as something that’s spreading like a sort of fractal stain, every point on the edge represents an interesting problem.
And when you get there, ideas that seem uncannily prescient to other people will seem obvious to you. You may not realize they’re start up ideas, but you will know they are something that ought to exist.”
How the Best Startups Happen
“The component of entrepreneurship (I can never quite say that word with a straight face) that really matters is domain expertise.
Larry Page is Larry Page because he was an expert on search and the way he became an expert on search was because he was genuinely interested and not because of some ulterior motive. At its best starting a startup is merely an ulterior motive for curiosity and you’ll do it best if you introduce the ulterior motive at the end of the process. So here is ultimate advice for young would be startup founders reduced to two words: just learn.”
The Value of Business School is Zero
“Q: Do you see any value in business school for people who want to pursue entrepreneurship?”
“A: Basically no, it sounds undiplomatic, but business school was designed to teach people management.”
The Role of Nontechnical Founders
“Q: How can a nontechnical founder most efficiently contribute to a startup?”
“A: If the startup is working in some domain, if it’s not a pure technology startup but is working in some very specific domain, like if it is Uber and the nontechnical founder was an expert in the limo business, then actually…the nontechnical founder would be doing most of the work. Recruiting drivers and doing whatever else Uber has to do and the technical founder would be just writing the iPhone app which probably less (well… iPhone and android app) which is less than half of it. If it’s purely a technical start up, the nontechnical founder does sales and brings coffee and cheeseburgers to the programmer.”
Startup School – How to Get Startup Ideas
This is by Jared Friedman, Partner at YC.
- Believing you need an amazing idea to get started.
- Jumping into the first idea that comes to mind.
- Starting with a solution instead of a problem.
- Believing that start up ideas are hard to find.
Jared suggests using a quality score formula based on the following:
- How big is the idea? Are there already large companies that do something similar?
- Is there a founder/market fit? Are you a domain expert?
- Are you solving a really big problem? Ideally you have personal experience with this big problem.
- Do you have groundbreaking insight?
- Are you building something you personally want to have?
- Is this something that only recently became possible? Did something change in the world like a new technology to create opportunities that did not previously exist?
Filters are unconscious reasons you reject good ideas.
- Is it really hard to get started? Paul Graham calls this schlep blindness.
- Is it in a boring space? Something like payroll software?
- Does it seem too ambitious?
- Are you afraid because there are existing competitors?
Recipes for startup ideas
This is listed in order of best to worst.
- Start with what you and your cofounders are especially great at doing and think of ideas where you have an unfair advantage.
- Think of things you wish someone else would build for you.
- What would you be excited to work on for 10 years even if it didn’t succeed?
- Look at how the world has changed recently and think of ideas that are now possible because of this change.
- Look at companies that have been successful recently and establish new variants.
- Crowd source your idea by talking to people you know and ask them for problems they want solved.
- Look at industries that seem broken and ripe for disruption.
Startup School – How to Vet Startup Ideas
This is actually a video from Startup School called “How to Talk to Users” by Eric Migicovsky. That said, talking to users is how you vet startup ideas.
Watch this if:
- You haven’t started talking to users yet
- Your users are asking for conflicting features
- You aren’t getting valuable information from talking with users
Much of this section is taken from The Mom Test. Or as Rob Fitzpatrick says on his website “How to talk to customers & learn if your business is a good idea when everyone is lying to you.”
- We pitch our idea. Focus on learning about their life and their problems.
- We talk in hypotheticals. For example, “If we built this feature would you use it?” Talk about the specific problems that have already occurred in a user’s life. Try to extract information by having them walk you through the path that led them to encounter the problem.
- As founders we do all the talking instead of listening to customers.
5 great questions to ask
- What is the hardest part about doing the thing that you’re trying to solve?
- Tell me about the last time you encountered this problem.
- Why was this hard?
- What if anything have you done to try and solve this problem?
- What don’t you love about the solutions that you’ve already tried?
For additional ideas on how to properly vet ideas and conduct customer interviews, see our summary of Running Lean.