These are notes I took on Sam Altman’s advice for startups
Make something users love
- It’s better to build something that a few users love than to build something that a lot of users like.
- You must know your user intimately. Know what they want, know how they use your product and then work back to the smallest possible thing you can build to test your hypotheses for the next most important need to fulfil.
- If users love your product then they will spread the word. Growth is a good way to see if users love your product.
Being a founder is hard / what makes a good founder?
- It’s not bad for your career, it’s great experience. But nothing has prepared you a framework for the kind of work and the intensity a startup entails.
- You need to be able to think and communicate clearly. This means being able to clearly describe your business and clearly communicating decisions that you make and clearly communicating your vision to potential recruits, potential customers and potential investors.
- A shared sense of mission between founders so that you are on the same page. This is especially important when times are tough and decisions are difficult.
- People will tell you your idea is shit. Don’t let them get you down unless they know what they’re talking about.
- Don’t let the setbacks get you down. Take a minute to feel shit about what has gone wrong. Then be pragmatic about the situation and figure out what you can do considering the reality.
- No first time founder knows what they’re doing. Lean on people, ask for advice, find a mentor.
- Be direct. Often the solution is to just ask for the thing you need.
- Be optimistic. Don’t lose sight of the vision amongst the short-term day-to-day challenges. Believe things will get better. But don’t be completely obstinate either.
Sam Altman – “What makes a great founder? The most important characteristics are ones like unstoppability, determination, formidability, and resourcefulness. Intelligence and passion also rank very highly. These are all much more important than experience and certainly “expertise with language X and framework Y. We have noticed the most successful founders are the sort of people who are low-stress to work with because you feel “he or she will get it done, no matter what it is.” Sometimes you can succeed through sheer force of will.
Good founders have a number of seemingly contradictory traits. One important example is rigidity and flexibility. You want to have strong beliefs about the core of the company and its mission, but still be very flexible and willing to learn new things when it comes to almost everything else.
The best founders are unusually responsive. This is an indicator of decisiveness, focus, intensity, and the ability to get things done.
Founders that are hard to talk to are almost always bad. Communication is a very important skill for founders—in fact, I think this is the most important rarely-discussed founder skill.
Tech startups need at least one founder who can build the company’s product or service, and at least one founder who is (or can become) good at sales and talking to users. This can be the same person.”
- Don’t waste time innovating in areas that are not your key product. Do HR, marketing, sales in a boring way and focus on your core competency.
Ingredients for success
- How will you become a monopoly? Your business needs to become more powerful as it grows and it needs to be hard to copy.
- Go after a growing market and take a large piece of a small part of it.
- Have a good idea. You can’t start a business because you want to. You need to have a good idea first and really want to work on it and be interested in it.
- Have a great product. There is no way around this. You need a great product that users love. You need to listen to your users’ feedback on your product but even more importantly, you need to watch your users use your product. They might say one thing but do another. So make sure you know *how* they use your product. You can optimise for local maxima, e.g. through A/B testing to improve click through or improve user retention or increase user referrals. You can do promotions to encourage users to do something for a while. But after a while these attempts to increase users/growth/revenue will dry up and the only thing you have is a good or bad product that users either tell others about or don’t.
- Do one thing at a time. Pick it and focus on it and don’t stop until you’ve done it. Doing too many things at once will likely mean that you don’t do any of them and in a longer period of time, only to find out none of them work. Prioritisation is essential.
- Take in all the advice and make decisions relatively quickly. Find out how to get 90% of the value for 10% of the effort because all customers care about is value.
- Sam Altman: “A successful startup takes a very long time—certainly much longer than most founders think at the outset. You cannot treat it as an all-nighter. You have to eat well, sleep well, and exercise. You have to spend time with your family and friends. You also need to work in an area you’re actually passionate about—nothing else will sustain you for ten years.”
Tell people about your idea
- Sam Altman – “The best ideas sound bad but are in fact good. So you don’t need to be too secretive with your idea—if it’s actually a good idea, it likely won’t sound like it’s worth stealing. Even if it does sound like it’s worth stealing, there are at least a thousand times more people that have good ideas than people who are willing to do the kind of work it takes to turn a great idea into a great company. And if you tell people what you’re doing, they might help”
Things to sort out
- Sam Altman – “A quick note on equity: the conversation about the equity split does not get easier with time—it’s better to set it early on. Nearly equal is best, though perhaps in the case of two founders it’s best to have one person with one extra share to prevent deadlocks when the cofounders have a fallout”
- Agree on what should happen under certain eventualities. This will be a bit of a downer of a conversation but it’s better to get it out the way early. Questions like: “what should we do if cofounder A wants out?”, “what should we do if the company goes under?”, “what if we make this much money, what salaries should we take?”, “what are our respective personal goals for the business? (e.g. I want to solve a problem vs I want to make lots of money vs I want independence)”, “will this be the primary activity for each of us?”, “what is the expected time commitment?”, “how long do we give ourselves, 3 months or 6 months?”, “do we sell the business at £1m or £10m?”, “what are we willing to change?” (pivot market, or product or customer etc.), “how do we want to work?” (e.g. remotely or find an office), “how much money/shares should we set aside for the first 5-10 employees?”, “Do we want to hire fast to fill skill gaps or grow slowly but surely?”, “are we all happy getting our hands dirty in each other’s speciality? (hint: yes, you should be)”, “how should we make decisions?” (by majority vote or by trying everyones ideas alongside each other etc.), “how should we give feedback to each other?” (if we’re unhappy about certain things, how do we raise it?), “if we’re successful, what kind of company do we want to be?”
“Do things that don’t scale”
- Get your first customers manually. Go out and meet people. Give your first customers a great experience and services you couldn’t offer if you had 100s of customers. Don’t try and automate things too soon before you learn what the manual process is. Don’t sit in a cave and hope that a big launch will somehow attract users.
- Sam Altman: “You also need to break things into very small pieces, and iterate and adapt as you go. Don’t try to plan too far out, and definitely don’t batch everything into one big public release. You want to start with something very simple—as little surface area as possible—and launch it sooner than you’d think. In fact, simplicity is always good, and you should always keep your product and company as simple as possible.”
- Sam Altman: “Some common questions we ask startups having problems: Are users using your product more than once? Are your users fanatical about your product? Would your users be truly bummed if your company went away? Are your users recommending you to other people without you asking them to do it? If you’re a B2B company, do you have at least 10 paying customers?”
Growth is king
- If you’re not growing, the only solution is to grow. If you’re growing then things are exciting, responsibilities grow and opportunities present themselves. If you’re not growing then people squabble over roles and are demotivated by the lack of momentum or lack of opportunity.
- So make growth a priority. Have a growth metric that you measure yourself against, e.g. 100 new users a month. Keep a list of what’s blocking growth. Have complete transparency around internal metrics so that you know if you are going in the right direction. Don’t have vanity metrics like user sign ups, this ignores retention. Make sure you measure the whole picture.
- It’s also important to establish an internal cadence to keep momentum. You want to have a “drumbeat” of progress—new features, customers, hires, revenue milestones, partnerships, etc that you can talk about internally and externally.
- You should set aggressive but borderline achievable goals and review progress every month. Celebrate wins! Talk internally about strategy all the time, tell everyone what you’re hearing from customers, etc. The more information you share internally—good and bad—the better you’ll be.
- There are a few traps that founders often fall into. One is that if the company is growing like crazy but everything seems incredibly broken and inefficient, everyone worries that things are going to come unraveled. In practice, this seems to happen rarely (Friendster is the most recent example of a startup dying because of technical debt that I can point to.) Counterintuitively, it turns out that it’s good if you’re growing fast but nothing is optimized—all you need to do is fix it to get more growth! My favorite investments are in companies that are growing really fast but incredibly un-optimized—they are deeply undervalued.
- Don’t worry about the future too much. Worry about things that are 10x your size. But don’t worry about 100x or 1000x. E.g. it’s fine to have customer support that doesn’t scale at first. Worry about scaling it when you get to the size when it needs to scale imminently because your time is better spent elsewhere than guessing the future that might not arrive because you were trying to guess it.
- Do things that don’t scale but you still need to have good unit economics. Don’t think you’re growing simply because you’re paying users to sign up. You need to have a really good reason to do this.
- Don’t get demoralised because growth is bad in absolute numbers. Look at percentages as well.
- Don’t count on one growth strategy. Try different things out and do more of what works.
- Don’t hire. Employees add a lot of complexity. You also want to expose yourself to the work that needs to be done before hiring someone to do it for you, otherwise you won’t understand the nature of the problem and whether they’re doing their job well.
- The best people have a ton of options and only want to join a company with momentum. They also need shares and responsibility and trust to be motivated, so be willing to invest.
- When it’s time to hire, a CEO should spend ~25% of their time on it. Lots don’t and then pay the price of hiring average people.
- Don’t hire negative people. They don’t suit the optimism that is required and that shit spreads like wild fire.
- Learn to be a good manager. It’s more important to have a well functioning team that is happy and motivated than it is to deliver 10% faster on something. Make sure you give due time to the team to satisfy their needs and don’t go into hero mode where you’re overcommitted and aren’t available to those who need you.
- Culture is defined by who you hire, fire and promote. Get rid of people who aren’t helpful to others. Promote those who are doing well.
- It’s far rarer for a startup to die because of competition than it is for a startup to die because they focussed on their competition. Do your thing, build your product and don’t focus too much on what those around you are doing unless it’s a real game changer. Competitors announcing stuff,
Sam Altman – “In any case, try to get to “ramen profitability”—i.e., make enough money so that the founders can live on ramen—as quickly as you can. When you get here, you control your own destiny and are no longer at the whims of investors and financial markets.
Watch your cash flow obsessively. Although it sounds unbelievable, we’ve seen founders run out of money without being aware it was happening a number of times”