Book Summary — The LaunchPad. Inside Y Combinator
By: Michael Batko
Tags: Startup, Startup Mantra, Yc, Y Combinator, Launch Fast

Age — the younger the better

If there is a single perfect age, the Kalvins are at that age, a little more mature that undergraduate students but not yet encumbered with the mortgages and children that make leaving a conventional, well-paying job at an established, profitable company so difficult.

If you start a startup, you’ll probably fail. Most startups fail. It’s the nature of the business. But it’s not necessarily a mistake to try something that has a 90% chance of failing if you can afford the risk. Failing at forty, when you have a family to support, could be serious. But if you fail and 22, so what? If you try to start a startup right out of college and it tanks, you’ll end up at 23 broke and a lot smarter, which, if you think about it, is roughly what you hope to get from a graduate program.

Post Interview — Graham:

“They pass my test for young founders, which is, they seem older than they are.”

If I had to pick a sweet spot for startup founders — I would probably say mid-twenties.

For them, there would be no safe retreat back to school. Startup failure would be embarrassingly obvious to family and friends, which ensured that the founders’ commitment to the startup would be total.

Equity stake — an IQ test

In the early days YC bought 7% for varying $ amounts. Each team got $11k + $3k per founder of up to a total of $20k.

In 2008 Graham described the YC offer as an IQ test: “If we take 6%, we have to improve a startup’s outcome by 6.4% for them to end up net ahead. That’s a ridiculously low bar. So the IQ test is whether they grasp that.”

Selection — promising vs unpromising

We found that applications fell into 3 categories: promising, unpromising and promising people with unpromising an idea. We are willing to sit down with groups in the last category to work out a new idea.

The one configuration that YC partners are most vigilant about uncovering during the interviews is “hackers in a cage”, where one non-technical founder holds controlling power and treats the hackers as subordinates.

Paul Graham initially set out a formal rule: no funding of startups with only one founder. He later relented a bit, allowing occasional exceptions.

The very fact that a startup didn’t have cofounders was evidence, in his view, that the founder’s friends had withheld placing their confidence in the founder. That’s pretty alarming because his friends are the ones who know him best. You need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong.

YCs experience showed that four founders were too many — decision making was too cumbersome.

YC Mentality

Make something people want.

Here, we don’t fire you. The market fires you. If you’re sucking, I’m not going to run along behind you, saying, “You’re sucking, you’re sucking, c’mon, stop sucking”.

I tried a little bit, out of frustration. But it doesn’t work. When people are doing badly, they continue to do badly. It’s kind of sink or swim. We’ll help you. We love to help you if you want help. But if you drift off and do nothing, we’re not going to come find you and drag you back.

The most successful startups are the ones that completely remove distractions — they just sleep, eat, exercise and program.

They don’t fuck around, right? The startups that succeed, they don’t go to meet-ups, they don’t run around talking to board of advisers, they just write code and talk to customers, right? — it’s Paul Graham’s oft-repeated mantra — Write Code and Talk to Customers.

The startup was our baby. It’s like we’re married, but we’re not fucking.

Startups do to relationships between the founders what a dog does to a sock, if it can be pulled apart, it will be.

About 30% of YC companies, sooner or later, will experience a split among cofounders.

Hug!

The reason I wanted you to hug is because you should literally be hugging each other more. As cofounders, your relationship is as important or more than the product you’re building. So you need to work on that relationship in the same way you work on your product. And the two best ways to work on that relationship are: one, show love, and two, go to the gym together every day. Seriously. Seven days a week. Do it. It’s important.

There was ac actually another third reason for the hug — it presented an ambiguous situation. I didn’t tell you who to hug. You had to find someone to hug, and maybe he’s trying to hug someone else, and that makes you a little nervous or whatever. That ambiguity in the hug dimension is a metaphor for the ambiguity you will face with your business and there will be no one who can truly help you in those situations.

1. Put yourself out there and meet people even if it’s awkward.

2. You’ve got to hug your cofounders and love your batchmates.

3. Experts aren’t going to help you solve your problems.

YC Program

Work on code and talk to customers. Launch fast and iterate. Focus on one measurable weekly goal.

→ beyond the basics there is plenty of variation between YC partners.

Tuesday dinners with YC alumni which are off-the-record.

The weekly gathering prods the founders to work harder because of the power of shame avoidance: they would not want to embarrass themselves by having little progress to report to their peers.

Techstars — arranged to have volunteer mentors for each startup

YC — never used the term “mentor”

Strictly speaking, programs that provided workspace were “incubators” and those that did not were “accelerators”.

By design, YC did not provide workspace for its companies. Graham had a strongly negative opinion on incubators. He believed that an independent cast of mind, which would chafe under close supervision in incubator-supplied office space, was needed for success as a startup founder.

Office hours with Paul Graham other YC partners and in the early days Jessica Livingstone handled the intracompany conflicts and legal issues.

Another form or help came through “Inflection point meetings”. Only startups at critical stages received that when they needed help from more than one partner.

Prototype Day — when each startup will have 2 minutes to tell the group what idea they are working on.

Demo Day

Here’s a trick for deciding how fast to talk, if it doesn’t feel wrong, you’re talking too fast.

If you have a strong accent, you need to speak slowly.

No one should have a slide that could fit into another startups presentation. “We’re going to disrupt this market” is the prose equivalent of a stock photograph.

In general, the first 15 seconds of your presentation is the worst time for a gimmick. Because the first 15 seconds of your presentation is when investors decide to pay attention or not. If I were you, the first things I want to say are: we built a great X and we have incredible hockey stick growth.

Women — too few in tech

The problem was that hacking generally begins around the age of 13, when boys show more interest than girls. He also observed that hackers tended to spend time with each other as pairs, and the pairs were same sex.

When you realise that successful startups tend to have multiple founders who were already friends, a possible explanation emerges. People’s best friends are likely to be of the same sex, and if one group is a minority in some population, pairs of them will be a minority squared. Underrepresentation was a matter of “math”, not “malice”.

He speculated that if anything YC probably had a far higher rate of acceptance for female applicants than for male.

Statistically speaking women have a huge advantage as entrepreneurs, because the press is dying to write about them, and VCs are dying to fund them. Just so no one will point the accusing finger of discrimination at them.

Startups and Ideas

The essential nature of a startup is not that it is a new business but that it is a new business set up to grow very quickly — it must be “designed to scale”.

Here’s how to generate new ideas:

1. Founders are target users.

2. Not many people could build it, but founders are among them.

3. Few people realise it is a big deal.

Ask yourself: What do I wish someone would start a startup to do for me?

The next best thing: Something for someone else that you know is a problem.

Scaling and Growth — decision making

Essentially, it’s way better to make the wrong decision than it is to make no decision at all.

Obviously, the idea that you work on is important. But try and pick things where the cost of failure is low and the cost for you is basically time.

“Launch Fast” is Paul Graham’s mantra. Move from the idea to a minimally functional product as quickly as possible. Only by getting a product into the hands of customers, even if the product is only a prototype, is it possible to know what customers want. Launching fast is how to make something people want.

Reid Hoffman: If you’re not embarrassed by the first version of the product you’ve launched, you’ve launched too late.

He suggests that startups set a specific weekly target for growth, which can be measured in terms of revenue or users or something else but should be essential to the startup. Anything that is not directly related to that metric is to be pushed to the wayside.

Aim for 10% growth — per week. He knows that ambitious founders do not like the feeling of having failed, even briefly.

“You make what you measure” — the act of measuring some aspect of performance leads to caring about that one thing and lavishing your attention on it, which, in turn leads to improving it.

If you’re trying to hit a specific growth target each week, you’ll find you think really hard about what you spend your time on. Before spending three weeks on a new feature, you’ll be thinking: Is this going to help us make our numbers or not? Could we write a simpler version in a day and see how much users like it before risking 3 weeks? Before you spend a day talking to the press, you’ll be asking yourself: how many actual users is this going to bring to our site?

VC and Angels

VCs are “fast followers”. Most of them don’t try to predict what will win. They just try to notice quickly when something already is winning. But angels have to be able to predict.

Fundraising is not the battle that you’re fighting here. The battle you’re fighting is to make a successful company that makes this great product and gets tons of users. And fundraising is just this tedious errand to be got over with as quickly as possible.

Sales — always be closing

You’re looking for someone who is like an animal, one of those people who doesn’t take no for an answer. Super aggressive. Really scrappy. When you meet a good salesperson, you would buy something from them.

You have to be good at hacking AND be aggressive in sales. Everybody we fund is good at hacking. We can tell that! When I say sales, I don’t mean people calling you up. I mean going out and talking to customers to figure out what they want. So why don’t you try this: erring on the side of sales. Just spend ALL your time doing sales and treating hacking as a side project.