YC Past Startup School Talks Review
YC has updated its Startup School Curriculum a few days ago. It is the course for seven weeks with 2–3 videos per week starting June 27. Before I go deep into learning a new generation of this legendary course, I gonna share my thoughts and experience on the subjects of the previous version.
In general, if you watch all the videos in this series plus read a couple more articles by Paul Graham, you won’t need to dig any deeper into methodologies and theoretical experience. Just launch your startup!
1. How to Get Startup Ideas
The startup ideas that make a successful business don’t emerge on their own. It’s impossible to come up with a successful business through long and extensive discussions about cool startup ideas. Such ideas grow organically when you face the problem yourself.
There are two important things here:
1. You’ve faced the problem yourself and experienced the inconvenience. Preferably, if you’ve lived it several times. And you got so freaked out by it that you found no other solution to the problem than to create your own startup.
For example, I launched a dating startup with immediate without a chat, because I experienced the agony of using Tinder, where it takes around two weeks from a match to a meeting.
2. You encountered the problem in its natural environment. You haven’t artificially tried to create a situation where the problem occurs. Or you didn’t go around the world looking for a problem to solve with your own unique solution. Rather, you’ve encountered the problem in the situation in which it occurs. The best confirmation that you did it right is being able to validate the presence of a problem with other people in similar situations.
For example, I faced the problem of searching for projects or a job with relocation, because all my network was within Russia. So now I understand well those who are looking for a job with relocation and don’t know where to start. This helped me and Intch to quickly launch a relocation project in Sweden.
The size of the market and your ambition at the idea and problem discovery stage is still important. The most important thing is to go look and see how other people and companies are solving this problem right now.
There are two important things here, too:
1. You don’t have a hallucination and such a problem exists. You are not the only one who sees the problem. The problem causes monetary/emotional/temporal damage that can be measured.
For example, Snapchat solved the problem of users sending each other dickpicks and nudes without long term consequences to the sender by adding self-destructing photos.
2. There is no solution on the market that solves this problem well. You and others are using some kind of band-aid solutions and poorly adapted products to solve their problem.
For example, Stripe came up with a suitable solution for accepting payments in online stores. Well there just wasn’t anything suitable specifically for online payments for online businesses.
2. How to Evaluate Startup Ideas
At the heart of any startup there’s growth. There’s a lot of talks about fast growth. Because fast growth allows you to outperform your competitors more quickly. Faster you get ahead of the competition, you become rich faster, not the other way around. There’s an approach for B2B SaaS how to become a unicorn in five years — T2D3. Two years to lose turnover, and then three years to double it.
Examples include Marketo, NetSuite, Omniture, Salesforce, ServiceNow, Workday, Zendesk.
How do you gain a rapid growth?
Find a problem that is frequent, permanent, incremental, annoying, expensive, and mandatory to solve. That is, we get a problem that is experienced by +1 million people/companies, the market for solving this problem grows 20% annually, the total market size is +1 billion USD, market regulation is predictable and clear.
For example, I did my dating startup exactly according to these criteria last year. Investors appreciated it, because they went over exactly these points.
SISP — solution in search of a problem. Not to shoehorn, but to look for a solution to a problem with an adequate technology. Don’t put blockchain where it’s not needed. Or on the contrary, don’t try to bypass the trust problem if the best solution is, in your case, a smart contract. But you need to have the competence to do so or the “secret sauce.”
For example, OpenSea or Sorare.
The secret sauce. At the heart of any success there’s an unfair competitive advantage that only you have. What does the ideal profile of founders look like? They’ve worked in an IT company for 10 years, have been involved in a specific area for a long time, haven’t found the capability or credibility within the company to solve the problem they thought was important, have gone to market with their idea.
For example, these are the recent graduates of YC W22, ngrow.
3. How to Talk to Users
It’s funny that in Eastern Europe it’s all called “cusdev” and “customer discovery,” although in the English-speaking world I’ve rarely seen such a clear name. There they just say “talk to users”/ “talk to clients”.
I’ve had some experience talking to users in relation to dating. I was conducting cusdev through other dating apps. Since I had already gone quite deeply into the subject and I was looking for specific information, I did not feel much of a difference between EU and the U.S. in terms of building the process. However, there were certain nuances in the perception of questions and answers.
I came to the conclusion that it’s better to ask people open questions in a written form first.
It helps to adjust the questions and understand the most common answers. Do this exercise 100 times (for B2C product), then load it in your head with scripts and you can start talking.
4. How to Pitch Your Startup
Quite a few parameters in the startup business are simply impossible to calculate. As Yuri Milner told, the only way to spot potentially brilliant founders at an early stage is to look at their mindset. The broader the outlook of the founders and the more curious they are, the better their chances of success.
An additional parameter from Nick Davidov’s point of view is the entrepreneurial experience of the founder. The chance of creating a successful project increases with each new startup. Venture capitalists often mention the third and beyond as the game changer point.
So how do you pitch a startup? Just go ahead and pitch.
A new perspective of understanding the process will open up in 10–20 pitches. The point, it seems to me, is simple — sell a teaser project in 30 seconds. During this time the investor should have a FOMO. This can be achieved by different methods in each case and may even depend on the mood of an investor.
For example, large American funds like to invite direct competitors to pitch sessions and arrange a “gang bang” for a founder.
5. How to Plan an MVP
For everyone who is now based in the former Soviet Union, the task is quite strictly formulated — start with a foreign market right away. Don’t make the mistakes that I and thousands of other startups have made. All the experience you get from a startup in your own country can simply be multiplied by zero if your target market is the U.S. or Europe.
Well, that’s what MVPs are all about: resolving the biggest pain points for the least amount of effort. What does it look like in practice? Just use your hands/feet/mouth to sell/do/create something for a customer as a solution to their problem.
Don’t make an app, make a simple web.
Don’t create a landing page, just put it all in Notion.
Don’t rent an office, buy a subscription to Zoom.
Maximum effect for the effort.
That’s what MVP is, it will change again hundreds of times. So, listen to what your client says. They can say a lot of different things, but not all of them are their pain. There are a lot of wishes that they think are their own pain. Believe me, I’ve done over 1500 interviews with different clients in the past year, and I still seem to be just learning.
Is it harder in English? I wouldn’t say so. This is more of a common problem for the founders: the failure to listen and defend your idea. If you learn to listen in your language, you won’t have any problems in English at the first step. But later, when you need to go deeper into the details to understand why they stopped buying or didn’t buy after the price increase, it’s better to learn the language and ask experienced friends to help you. I can be useful to you in this. We can help with an MVP and collecting feedback in the English-speaking markets.
6. How to Prioritize Your Time
Actions are a startup’s greatest resource. Actions per day is the main metric. Not just any actions, but the effective ones. Effective actions lead to / increase the value for your client. The value for your client is in direct proportion to the amount of money they’re willing to pay you.
So you can forget about all the pretty icons in the pitch deck like Product Hunt product of the day. Come on, if you understand that this result is achieved by non-targeted actions for a startup, then investors and peers can understand it even better.
The customer funnel and the revenue is the basic 101.
The funnel is evaluated from the end.
Already agonizing for weeks/months with an overseas market? It’s time for us to talk. Drop me a line. We’re pumping up teams on getting into English-speaking markets. My partner is on the language side, me is on the business side. Believe me, it has been proven hundreds of times that just translating your landing page into English does not work.
7. How to Find the Right Co-Founder
This is not a topic that I can fit into one post or a long thread. I can’ t even simplify it, although I often play around with being primitive in business. The reality is that things aren’t easy and it requires an incredible amount of effort, and everyone has a different amount of effort.
Entrepreneurs differ from everyone else just because they have a little more energy or their recovery is more efficient. Or they can just take a little more risk and try a little more because they don’t run out of steam.
A startup, despite stereotypes, is an incredibly long and hard thing to do. That’s why only another founder can help. Together they can do more.
A good person is not a vocation, and a good professional is not always a great co-founder.
Here’s the only advice I can give based on my experience. Choose people as co-founders who you know well in work related matters. Ideally, if you have worked together for several years, had ups and downs, fights and happy moments.
It’s more important not to find the best professional, but someone you understand and accept.
8. How to Work Together
I really liked the comparison between everyday life and the startup crowd. We’re really fighting about the same things. People haven’t changed much in the last few thousand years, and they care about more or less the same things.
So it’s important that the founders in your company act as mature and conscious people. You have to form and develop a team, like the captain of a ship. You are setting out on a distant voyage in quest of the New World, where the chances of failure are great.
And what does it take to run a ship? Discipline, determination, shared responsibility, etc. Don’t forget not only to rush your sailors, but also to throw a grog party when you’ve weathered the storm.
9. How to Split Equity Among Co-Founders
I bet many startups have died because founders failed with this exercise. There are several shortcuts.
Co-founder equity split frameworks:
- The Co-Founder Equity Calculator. It works for up to four founders.
- Embarke co-founder equity split template in excel: four different approaches summarize in weighted average figures.
Stock vesting. The golden standard is four year vesting period with a one year cliff:
- Article in CooleyGo with basics founders stock.
- Article in Startup Lawyer about four years vesting and one year cliff.
10. Building Culture
There’s an incredibly important point to think about right at the beginning of any company’s journey. Don’t underestimate the importance of culture, because it’s the link to your team. It’s the culture, not the processes. Here are some important takeaways I’ve identified.
“If You Want To Run Fast, Run Alone. If You Want To Run Far, Run Together.”
1. Conduct fit interviews first and foremost.
That’s why it’s best to start every interview with a human contact and a discussion of values. Are you on the path together? Do your horizons and goals align? How can you help each other achieve your goals?
2. Don’t let assholes in.
Once assholes get on your team, they’ll immediately start building an alternative culture and entrenching in the company.
Usually assholes have a couple of strong qualities that makes it incredibly painful to fire them, because that’s how life works. It’s like giving up your soul in exchange for a super skill.
However it’s important to fire them as soon as possible, because otherwise they will poison the team climate and cause a cancer as the team grows. The more progressive the stage, the more dangerous is the addiction and the more lethal are the consequences.
3. Strength in Diversity
I’ve seen more than once that in the long run it pays off a hundredfold to have people from different backgrounds as a part of a team. It’ll be difficult and painful at first, but you’ll all benefit in the long run. So keep an eye on a gender balance, look for people who are not like you. Give everyone a voice and an opportunity to act, even if it feels wrong.
11. How to Lead
Who can be a leader?
Anybody, there is no single type of leadership. The most important thing is to be yourself. There are different great founders: with a technical background, salespeople, strategists, etc. They all have one thing in common: a sincere belief in their company and product. If you try to imitate someone, it won’t work. Your team will sense the falsity, people always are very sensitive to this.
What characteristics of leaders can be distinguished?
- Think and broadcast clearly and transparently. If you’re well understood, and you do understand what you are communicating, that is the first step to success. Communicate your priorities clearly and consistently.
- Treat employees with respect and don’t devalue their contributions. A leader doesn’t win on their own, but together with their team. «The king is played by the retinue». Seek to hire people who are smarter and more qualified than you in certain areas. Give them a leeway within the scope of the tasks they perform. Tasks will align with the strategy if you follow the previous point well.
- Integrity in commitments. Don’t deceive anyone about where you are taking the company. Be consistent in what you do, otherwise it will be hard to expect consistency from your employees.
What’s the secret sauce?
The trust in the leader from employees, investors and others. And the leader’s trust in them in return.
12. Essential Startup Advice
In this article there’s a nice list of basic things that you can learn every morning as part of your startup activities. I’ll dive into a couple of them as part of my experience.
Do things that don’t scale
Early on, it’s important to focus on tasks that cannot be scaled. They include defining a target customer profile, getting your first deals done, or selecting a technology stack. Tasks that can’t be delegated to 10–100 employees because they will be following the well-trodden path rather than paving the way to a new reality.
Write code — talk to customers
These’re communicating vessels that affect each other. Customers articulate the pains you’re trying to solve, but they can’t articulate the solution path. This is already your task. So write the code and look at the outcome, which can be assessed through conversations with your client.
Get sleep and exercise — take care of yourself
If I were an investor, I’d really put it together as a term of the contract, because a tormented funder creates tormented products. Keeping a balance is important, but don’t confuse balance with hedonism. Balance is created through actions that restore your energy. Because many activities in a startup waste energy. For some it’s important to go to raves once in a while, for others to swim in the pool. Without exception it’ important for everyone to get enough sleep, I can tell you that.
13. How to Find a Technical Co-Founder
Michael Seibel and Y Combinator advice is to start with your friends and coworkers. Make a list of them, rank the top five and make real offers. What if I don’t have any tech friends and coworkers?
1. Go to hackathons close to your product technology. You can find top software engineers and just talk to them. Your task is to understand their way of thinking and mindset.
2. Visit demo days of tech universities accelerators and incubators. You can have some work experience and the idea. Graduates have skills and a desire to apply their skills to something great.
3. Use networking app like Lunchclub, The Breakfast App, etc. Just talk and meet new people. Ask their opinion about your idea and ways of developing it.
Finally, do the same things as Michael said, rank the top five and make real offers.
14. How to Apply and Succeed at Accelerator
I am not a YC alumnus, but I had the pleasure and privilege of interacting with several of them. I can definitely say here: what matters is not what an accelerator or any training can give you, but what you are going to take. You can tell a lot about a person and their experience and ambition from one question.
Any training is an investment. An investment of time and effort that will pay off, depending on how much of that investment is targeted and how much time you really put into it.
From my experience of applying to YC, I can highlight a couple of points.
1. There are a bunch of different consultants and advisers who promise to help you create a successful application. Often their services are about helping you rewrite the application over 100 times. It’s important to understand what those who read the application want to see in each of the paragraphs, and evaluate how your answers fit into that vision.
2. A good application is no substitute for the performance and experience of the founders. YC gets projects at the idea stage, but it’s precisely because the founders have a great understanding of how they will solve the client’s problem at the very beginning and they have relevant experience. And not because they are the best at filling out an application. like excellent students.
15. Parting Advice
There is no single path for a perfect founder. Of course, funds like to invest more in experienced founders, but experience is something universal. It can refer to both creating businesses and solving relevant problems over a long period of time.
Some people succeed in launching a successful startup at 16 years old, and some people succeed at 50. The majority of founders do it between 30 and 40. But in your particular case it might be different, it’s just a “normal distribution”. If you pursue the goal of creating a startup, sooner or later you will get there. True, your success may take different forms than what you envisioned at the beginning of your journey. You wanted to build your own startup, but you got a fund. Wanted to build a business problem-solving project aka B2B SaaS, but ended up with a B2C hardware product. The paths of success are inscrutable, but wishes do come true. That’s why they say “be afraid of your dreams”, because they will come true, whether you’re ready for it or not.
Good luck to everyone on this road! If I can help you in any way, don’t hesitate to contact me, I will be glad to help you.
Evgenii Nelepko, GM/ BD @Startups