I Pledge Allegiance to the Grind II

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Killer Mike

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Then the fourth area^✦ -- it's just a personal^✦ organization^✦ one. When you are working^✦ on product,^✦ you don't actually^✦ need to be that organized^✦ in terms of how you run the company^✦ and how you talk to people about^✦ what they're working^✦ on. But if you fail to get your own personal^✦ organization^✦ system^✦ right - where you can keep track in some way of what you need to and what everybody^✦ else is doing and what you need to follow^✦ up with them on - that will come back to bite you. Developing^✦ this early^✦ as the company^✦ begins^✦ to scale is really^✦ important.^✦

Two other^✦ things that we hear again^✦ and again^✦ from our founders^✦ they wish that they had done early:^✦ simply^✦ writing^✦ down how you do things and why you things. These two things - the how and the why - are really^✦ important.^✦ In the early^✦ days, you just tell everyone.^✦ "Employee, when you're sitting around^✦ having^✦ lunch or dinner,^✦ you know this is how we think about^✦ building^✦ product.^✦ This is how we push to production.^✦ You know, this is how we handle customer supper."^✦

Whatever.^✦ As you get bigger^✦ you can't keep doing that. If you don't do it, someone^✦ else is just going to say it. But if you write it down and put it up on a Wiki or whatever^✦ that every^✦ employee reads, you as the founder^✦ get to basically^✦ write the law. And if you write this down it will become^✦ law in the company.^✦ And if you make everyone^✦ read this - as the company^✦ hires^✦ a hundred^✦ and then a thousand^✦ employees^✦ - people will read this and say, "Alright.^✦ That's how we do things."

If you don't do it, it will all be random^✦ oral^✦ transition^✦ of whatever^✦ the hiring^✦ manager or their best friend that they make it their first week in at the company^✦ tells them. So writing^✦ down how you do things and the why -- the why is the cultural values.^✦ Brian Chest talked^✦ about^✦ this really^✦ well. Every^✦ founder^✦ I know wishes^✦ they written^✦ down both of these - the how and the why- earlier^✦ to just establish it as the company^✦ grows. And then this becomes^✦ what happens.^✦ It's one of the highest leverage^✦ things you can do that people don't.

Next area^✦ - "HR". HR is another^✦ thing that most people correctly^✦ ignore^✦ in the first phase of start up because,^✦ again,^✦ it's not writing^✦ code. It's not talking to users.^✦ But it’s a huge mistake^✦ they continue^✦ to ignore^✦ it. The reason^✦ I think most founders^✦ ignore^✦ it is they have in their mind this idea^✦ of like TV sitcom^✦ HR, you know. Awfulness. But it doesn't have to slow you down. Actually^✦ it speeds you up.

Most founders^✦ will say out of one side of their mouth, "People are our most important^✦ asset."^✦ And the other^✦ side, "We don't want any^✦ HR." So what they mean is that we don't HR - we don't want the bad kind TV HR. What good HR means is a few things. A clear structure.^✦ Which we already^✦ talked^✦ about^✦ you know a path for people about^✦ how they can evolve^✦ their careers. Most important,^✦ one of the most important^✦ things is "Performance^✦ Feedback." Again,^✦ this happens^✦ organically^✦ early^✦ on. People know how they're doing. As the company^✦ gets to 25, 30, 45 people - that gets lost and it doesn't have to be complex. It can be super^✦ simple. But there should be a way that it happens^✦ and it should be frequent. People need hear pretty^✦ quickly^✦ how they're doing. It should tell if they are doing badly^✦ to where you get them out of the company.^✦ Or if they're doing well it should. There should be a clear path to how this ties to compensation.^✦ That’s the next thing.

In the early^✦ days of a startup,^✦ people compensation^✦ is whatever^✦ they negotiate^✦ with the founder^✦ and it's all over^✦ the place. As you grow - it feels hopelessly corporate^✦ but it really^✦ is worth putting in place these "Compensation^✦ Bands". So a mid-level engineer^✦ is in this range. A senior^✦ engineer^✦ is this range. Here's^✦ how you move from this to this. It keeps things really^✦ fair. Someday everyone^✦ will find out everyone^✦ else's^✦ comp. If it's all over^✦ the place, it will be complete^✦ meltdown disaster. If you put these bands in place early^✦ you will at least be fail. It will also^✦ save you a lot of crazy^✦ negotiation.^✦

One thing that I think is really^✦ important^✦ when it comes^✦ to HR is equity.^✦ Most people get this right now for the early^✦ employees.^✦ They give a lot of equity.^✦ But you should continue^✦ to give a lot of equity^✦ all the way through. And this is one place that you investors^✦ will always^✦ give you bad advice.^✦ I think - not YC. But all other^✦ investors^✦ give bad advice^✦ here. Most do. You should be giving^✦ out a lot of equity^✦ to your employees.^✦ Now this dilutes^✦ everyone.^✦

Right? This dilutes^✦ you as the founder^✦ and the investors^✦ equally.^✦ For some reason^✦ founder^✦ usually^✦ understand^✦ this as good. Investors^✦ are very^✦ short-sighted and don’t want to dilute^✦ themselves^✦ so they'll like fight you over^✦ every^✦ equity^✦ grant. But, we've seen a lot of data^✦ at YC now and the most successful^✦ companies^✦ - and the ones^✦ where the investors^✦ do the best - end up given^✦ a lot of stock out to employees.^✦ Year after^✦ year... After^✦ year.

So I tell founders,^✦ "You should think about^✦ for the next ten years you're going to be given^✦ out 3- 5 percent^✦ of the company^✦ every^✦ year 'cause you just get bigger^✦ and bigger.^✦ So the individual grants gets smaller but in actuality^✦ it's a lot of stock. This is really^✦ important^✦ to do if you value your people you should be doing this. Specifically,^✦ you need to do this with refresher^✦ grants. And you should get a plan in place for this early.^✦ You never^✦ want an employee in a place where they vested^✦ 3 out of their four years in stock and they start thinking^✦ about^✦ leaving. So you should ALWAYS^✦ stay in front of peoples^✦ vesting^✦ schedules. And you know how they plan early^✦ where you have refresher^✦ grants in place.

There are a lot of new structures that people have been using^✦ here. I personally^✦ like six year big grants - but six years of vesting.^✦ 'Cause I think these companies^✦ take a while to build. There's^✦ pyramid vesting^✦ where you back weight someone’s grant. In year four they get a lot more of the vesting^✦ than year one. There's^✦ a concept - different^✦ names^✦ for it, but something^✦ like continuous^✦ forward^✦ vesting^✦ where people's^✦ grants are automatically^✦ re-upped. Every^✦ year. At the same number^✦ of share. Whatever^✦ you decide,^✦ get an option^✦ management^✦ system^✦ in place at about^✦ this point. The normal^✦ way people do this is just someone^✦ keeps an Excel^✦ spreadsheet.^✦ I have seen mistakes^✦ that have cost employees^✦ or companies^✦ tens of millions^✦ of dollars^✦ because^✦ they didn't get this right.There's really^✦ good option^✦ management^✦ systems^✦ or software and you should get those in place around^✦ this point.

The other^✦ sort of HR stuff to touch on - there are a bunch of rules^✦ that change around^✦ 50 employees.^✦ Common^✦ examples^✦ are that you have to start "Sexual^✦ Harassment Training^✦ and Diversity^✦ Training".^✦ There's^✦ a bunch of others^✦ as well. But just put a little pen in your mind that when you cross 50 employees^✦ there's^✦ a new set of HR rules^✦ that you have to comply^✦ with.

"Monitoring your team for burnout."^✦ Again,^✦ it's up to product^✦ market^✦ fit. It's just a sprint. Now it becomes^✦ marathon. At this point you actually^✦ don't want people to work a 100 hours a week forever.^✦ You want them to go on vacation.^✦ You want them to have new challenges and do new things. And if you let the whole company^✦ get burned^✦ out all at once - that is often^✦ a company^✦ ending^✦ thing.

This is also^✦ a good time to put in place a "hiring^✦ process".^✦ Another^✦ thing that most founders^✦ regret^✦ is they don't hire - as soon as everything^✦ is working,^✦ you should hire a "full time recruiter". If you do this early^✦ - that's bad 'cause you'll hire too fast. That usually^✦ implodes. But most founders^✦ get behind^✦ the ball on this. There are a lot of sort of hiring^✦ process^✦ tips.

For example, I think most companies^✦ - even^✦ til they get up to say 3 or 4 hundred^✦ employees^✦ - should announce^✦ every^✦ offer^✦ on some internal^✦ mailing^✦ list or something^✦ before^✦ they make it. Because^✦ like half the time you do that. Someone^✦ in the company^✦ will know something^✦ good or bad about^✦ that employee. The companies^✦ that I know that have instituted this have been really^✦ happy.^✦ Also^✦ a good time to have a program in place to ramp up employees.^✦ So when someone^✦ starts, you know what their first week looks like. How did they get spun up? How do they learn everything^✦ they need to learn? Are they going to have a buddy^✦ that's going to think through them? That's going help them think through everything^✦ about^✦ the company.^✦

Here’s^✦ one that you do need to think about^✦ before^✦ the 12 to 24 month mark. Which is "Diversity^✦ on the team." The most common^✦ place this comes^✦ up honestly is people that hire you know all guys on their engineering^✦ team for the first 15 or 20 people. And at that point you get a culture^✦ in place that sort of takes^✦ on a life of its own. Most founders^✦ that I've spoken^✦ to that have made this mistake^✦ regret^✦ it. They wish they had hired^✦ some diversity^✦ of perspective^✦ on the team earlier^✦ on. Engineering^✦ teams are not the only^✦ place where it comes^✦ up. But that's where you see it the most often,^✦ and if you get this right early,^✦ you’ll be able to grow the team much more quickly^✦ over^✦ the long term.

The other^✦ thing to think about^✦ is what happens^✦ to your early^✦ employees.^✦ So a common^✦ situation^✦ that happens^✦ is the company^✦ past the early^✦ employees.^✦ You know the company^✦ - you hire a engineer^✦ who's a really^✦ great engineer^✦ but then as the engineering^✦ team grows, you need a VP of engineering.^✦ The early^✦ engineer^✦ wants to be the VP of engineering.^✦ You can't do that, but you don't want the early^✦ employee to leave. They are an important^✦ part of the culture.^✦ They know a lot. People love them. So I think you want you be very^✦ proactive^✦ about^✦ this. You want to think about,^✦ "What's the path for my first 10 or 15 employees^✦ going to be as the company^✦ grows?" And then just talk to them about^✦ it. Very^✦ directly.^✦ Be up front, you know. Sit them down and say, "I want to see where you want to see your career^✦ go inside^✦ of this company."^✦

Alright,^✦ so - "Company^✦ Productivity".^✦ This is something^✦ that you don't need to think in the early^✦ days because^✦ small teams are just naturally^✦ productive^✦ most of the time. But as you grow, it - the productivity^✦ - goes down with the square of the number^✦ of employees^✦ if you don't make an effort.^✦ Because^✦ it's sort of one these connections^✦ between^✦ nodes.^✦ Every^✦ pair of people add communication^✦ overhead. If you don't start thinking^✦ about^✦ the systems^✦ that you're going to put in place when the company^✦ is 25-50 people to stay productive^✦ as you grow - things will grind into^✦ a halt faster^✦ than you can imagine.^✦

The second^✦ word that matters^✦ most to keep the company^✦ productive^✦ as it grows is "Alignment". The reason^✦ companies^✦ become^✦ unproductive^✦ is people are either^✦ not on the same page and you know don't know what the same priorities^✦ are. Or they actively^✦ working^✦ against^✦ each other.^✦ Which is obviously worse. But if you can keep the entire^✦ aligned^✦ in the same direction,^✦ you have won well over^✦ half of the battle. The way to start with this is just a very^✦ clear road map and goals. Everyone^✦ in the company^✦ should know what the road map for the next three or six months or a year - depending^✦ on where the company^✦ is in its life cycle.

You know a classic test that I love to give - is if I walk into^✦ a company^✦ getting^✦ - beginning^✦ to struggle with these scaling issues^✦ - I'll ask the founders,^✦ "Like, if I walked^✦ around^✦ and pulled^✦ 10 random^✦ employees^✦ and asked^✦ them what the top three goals for the company^✦ are right now - would they all say the same thing?" And 100 percent^✦ of the time the founder^✦ says, “Yes. Of course they would."

Then I'll go do it and 100 percent^✦ of the time, no two employees^✦ even^✦ say the same three top three goals in order.^✦ The founders^✦ can never^✦ believe^✦ it. Because^✦ they're like, "Well I announced it in all hands like three months what are goals were going to be. And how can they not remember?"^✦ But it's really^✦ important^✦ to keep reiterating the message^✦ about^✦ the road map and the goals. Almost^✦ no founder^✦ does this enough.^✦ And if you do it, you know the company^✦ will say, "You know, alright.^✦ These are our goals. We understand^✦ them and we're going to get them. “ Self-organize^✦ around^✦ that. But if people don't know what the road map of the goals are, it won't happen.^✦

We already^✦ talked^✦ about^✦ figuring^✦ out your values^✦ early^✦ but I want to reiterate^✦ that. 'Cause that'll also^✦ really^✦ help company^✦ make the right decision.^✦ If everyone^✦ knows what the framework to decide^✦ it - they'll make hopefully^✦ the same decisions^✦ if they're smart people.

You want to continue^✦ to be run by great products^✦ and not process^✦ for its own sake. This is a fine, fine line. Because^✦ you do need to put some process^✦ in place. But you never^✦ want to put process^✦ in place that rewards the process.^✦ The focus^✦ has to always^✦ be on great product.^✦ One easy^✦ way to do this that a lot of companies^✦ try is they just say, "We're gonna^✦ ship something^✦ every^✦ day."

And if you do that - you know there's^✦ at least a continue^✦ focus^✦ on delivery. And then "transparency and rhythm" in how you communicate^✦ are really^✦ important.^✦ Most founders^✦ wait way too long on these but having^✦ a management^✦ meeting^✦ every^✦ week of just the people that report^✦ directly^✦ to the founder^✦ and the CEO - critical.^✦ All hands meeting^✦ - not quite sure how often^✦ is optimal for those. At least once a month. Where you go through the results^✦ and the road map of the entire^✦ company.^✦ Really^✦ important.^✦ Then doing a plan every^✦ quarter of what we're going to get done over^✦ the next three months and how that fits into^✦ our goals for the year - also^✦ becomes^✦ really^✦ important.^✦

I put "Offsite"^✦ up there, because^✦ people don't do those nearly^✦ enough.^✦ A surprising^✦ number^✦ of the successful^✦ companies^✦ we've been involved^✦ with do a lot of off-sites. Where they take their best people for a weekend to a cabin^✦ in the woods or somewhere and just talk about^✦ what we want to be when we grow up. What are most important^✦ things to be doing? What are we not doing that we should be doing? But get people out of the office^✦ and out of the day today.^✦ Everyone^✦ I know that does thinks they're well worth the time.

So the goal in all of this productivity^✦ planning is that you're trying to build a company^✦ that creates a lot of value over^✦ a long period^✦ of time. And the long period^✦ of time is what's important^✦ here. You can avoid^✦ all of this and with the authority^✦ of the founder^✦ - make sure the company^✦ ships a great next version.^✦ But that won't work for version^✦ 10. It won't work for version^✦ 11. The single hardest thing in business^✦ is building^✦ a company^✦ that does repeatable^✦ innovation^✦ and just has this ongoing culture^✦ of excellence^✦ as it grows. If you look at the examples^✦ of this - most companies^✦ fail here. Most companies^✦ do one great thing where the founder^✦ just pushes^✦ to get it done and then don't innovate^✦ that well on follow^✦ on products.^✦ It really^✦ takes^✦ founders^✦ that think about^✦ how I am going to do this second^✦ thing - this really^✦ hard thing to get something^✦ like an apple that can turn out great products^✦ for30 or 40 years. Or longer.^✦

Alright^✦ - these are super^✦ tactical^✦ "Mechanics". This is definitely^✦ just to put on a list and remember^✦ these things for later.^✦ Alright^✦ - in the early^✦ days. People basically^✦ ignore^✦ all accounting^✦ and maybe if they're lucky^✦ have a shoebox full of receipts. They certainly^✦ don't have anything^✦ that looks like a financial^✦ report.^✦ This is is a good time to get it in place. You know when things are working^✦ say month 18 or whatever^✦ - you can do this with an outsource^✦ person.^✦ Just say, "You know what? We like to get our books in order.^✦ We want to start getting^✦ audits^✦ every^✦ year. We want to start a relationship^✦ with an accounting^✦ firm." Easy^✦ to do. Definitely^✦ worth it.

This is also^✦ a good time to collect^✦ your legal^✦ documents because^✦ it's easy^✦ to fix things now. If you actually^✦ assign^✦ someone^✦ to go through and collect^✦ every^✦ agreement^✦ that the company^✦ has ever^✦ signed,^✦ then when your landlord tries to screw you out of your lease and no one can find the lease... Which happens^✦ like half the time somehow. Someone^✦ will be able to find it. Also,^✦ you're almost^✦ certainly^✦ missing something.^✦ Some employees^✦ didn't sign their PIAA or whatever^✦ and you'll find it now - it’s easy^✦ to fix now. It's gets really^✦ hard to fix like in the middle of your next round of financing.^✦ So again^✦ this is time to bring like a little of the order^✦ to chaos.

"FF Stock" is a special^✦ class of stock for founders^✦ that founders^✦ can sell in a later^✦ round without^✦ messing up the common^✦ stock valuation.^✦ It used^✦ to be that most people set this up right when they started^✦ the company.^✦ Founders^✦ fund sort of popularizes which is why it's called^✦ FF stock. But it became^✦ a really^✦ bad signal.^✦ Right that were obsessed with their own personal^✦ equity^✦ when the company^✦ had nothing^✦ - turned^✦ out to fail most of the time. So investors^✦ learned if founders^✦ pushed^✦ on this in the seed round, it was a very,^✦ very^✦ bad sign. Most founders^✦ don't actually^✦ want to sell stock until^✦ the company^✦ is worth like a billion^✦ dollars^✦ or something^✦ like. You can actually^✦ safely^✦ set this up after^✦ things start working^✦ in the next financing^✦ round and then you can sell it two, three, four years down the road. But it's a good thing to remember^✦ by around^✦ the time you get to the B round.

"IP, Trademarks^✦ and Patents".^✦ Actually^✦ just IP and trademarks.^✦ So, you have twelve months after^✦ you announce^✦ something^✦ if you want to patent^✦ it. And if you miss that window,^✦ it's very^✦ hard to do. So eleven^✦ months after^✦ launch or first publically^✦ talk about^✦ what you're doing - is a good time to file provisional^✦ patents.^✦ We recommend^✦ people just file provisional^✦ patents.^✦ All that does is hold your place in line at the patent^✦ office,^✦ and it gives^✦ you another^✦ year to decide^✦ if you want to patent^✦ something^✦ or not. It only^✦ costs about^✦ 1000 dollars.^✦ It takes^✦ way less effort^✦ than a full patent.^✦ And most of the time you'll know whether^✦ or not you'll need a fully^✦ patent^✦ a year later.^✦ But if you just do this one step, you'll at least have the option.^✦

It's also^✦ a good time to file trademarks^✦ for the US and major^✦ international^✦ markets. Again,^✦ if you don't do this at this stage - most people end up regretting^✦ it. And while you're at it - a good time grab all the domains.

FP&A -- good time, also^✦ to think about^✦ someone^✦ to start doing FP&A. Most companies^✦ don't end realizing where they knobs on their financial^✦ model^✦ are until^✦ far too late. It turns out that if you have someone^✦ build a really^✦ great model^✦ of the business^✦ - and by really^✦ great, apparently^✦ Roelf Botha^✦ - who was the PayPal^✦ CFO and built their FP&A model^✦ - the top, like the top sheet of his spreadsheet^✦ was 15 hundred^✦ lines^✦ just a level^✦ of the detail^✦ people build these to. But you can really^✦ optimize^✦ the business^✦ and understand^✦ it at a level^✦ that most people totally^✦ miss. Most people don't hire someone^✦ like this until^✦ their many^✦ hundreds of employees.^✦ It's worth hiring^✦ earlier.^✦

Another^✦ thing that I think is worth hiring^✦ earlier^✦ that almost^✦ no one does is a full time fundraiser. Let's say you hire someone^✦ really,^✦ really^✦ great and their full time job is to raise money^✦ for the company.^✦ You hire them after^✦ your B round. And you say, "You know what? By the time we raise our C round, we want the valuation^✦ be double what it would have been otherwise."^✦ You almost^✦ certainly^✦ get better^✦ results^✦ than if you hire an investment^✦ banker^✦ or someone^✦ else if it’s just someone^✦ internal^✦ with the company.^✦ And you end up paying way less money^✦ and take literally^✦ half the dilution.^✦ This is one these slightly^✦ non-obvious^✦ optimization^✦ that people just fail to make.

"Tax structuring".^✦ This is another^✦ thing. Once things are working^✦ it would be worth you spending^✦ a little bit of time thinking^✦ about^✦ how you set up the tax structure^✦ for the company.^✦ I confess I don't know a lot about^✦ the details here 'cause I just find it personally^✦ really^✦ boring.^✦ But like if you assign^✦ the IP to some corporation^✦ in Ireland that licensing it back to the US Corporation.^✦ You end up paying no tax. No corporate^✦ tax. But I know that you can only^✦ do that relatively^✦ early^✦ on. And this ends up being a huge issue for companies^✦ that don't do it that compete^✦ with companies^✦ that do it you know once they're big public^✦ companies.^✦ So that's worth doing.

A lot of people through the class have talked^✦ about^✦ "Your own Psychology"^✦ as a founder.^✦ Here's^✦ what they haven't^✦ said. It gets worse. Not better.^✦ As the company^✦ grows you continue^✦ to osculate.^✦ The highs are better^✦ but the lows keep getting^✦ worse. And you really^✦ want to think about^✦ this early^✦ on and just be aware^✦ that this is going to happen.^✦ And try to, try to manage^✦ your own psychology^✦ through the expanding^✦ swing that it's going through.

Another^✦ thing that happens^✦ as you begin^✦ to be successful^✦ as you go from being someone^✦ that most people rooted^✦ for - kind of the underdog. To someone^✦ that a lot of people hating^✦ on. You see this first in internet commenters who will be like, "I can't believe^✦ this shitty^✦ company^✦ raised^✦ money.^✦ It fucking sucks. It's like awful. And it only^✦ bothers you a little bit. But then journalists^✦ that you kind of care about^✦ it start writing^✦ this and it just goes on and on. This also^✦ will go on and on as you get more and more successful.^✦ You just have to make peace with this early.^✦ But if you don't it will bother^✦ you all the way through.

This is also^✦ a good time to start thing about^✦ how long of a journey this is going to be. Very^✦ few founders^✦ think long term. Most founders^✦ think kind of a year in advance^✦ and they think, "You know what? In three years I am going to sell my company^✦ and either^✦ I am going to become^✦ a VC or sit on the beach or something."^✦ Because^✦ so few people make an actual^✦ long term commitment to what they're building^✦ - the ones^✦ that do have a huge advantage.^✦ They're in a a very^✦ rare flight class. So this is a good time to sit around^✦ with your co-founders^✦ and decide,^✦ "You know what - we're going to work on this for a very^✦ long time and we're gonna^✦ build a strategy^✦ that assumes that we're going to be doing this for the next ten years." Just thinking^✦ that way alone,^✦ it's probably^✦ a very^✦ high leverage^✦ thing you can do for success.

Take vacation.^✦ Another^✦ common^✦ thing that we see is founders^✦ will run their business^✦ for three or four years without^✦ ever^✦ taking^✦ more of a day of vacation.^✦ And that works for a year or two years or something^✦ like that. It really^✦ leads to a nasty^✦ burn out.

Losing^✦ focus^✦ is another^✦ way that founders^✦ get off track. This is a symptom of burnout.^✦ When you get really^✦ burned^✦ out on running business^✦ you want to do easier^✦ things or sort of more gratifying^✦ things. You want to go to conferences^✦ and have people tell you how great you are. You know what to do all these things that are not actually^✦ building^✦ a business.^✦ And the most common^✦ post YC failure^✦ case for the companies^✦ we fund is that they are incredible^✦ focused during^✦ YC on their company^✦ - and then after,^✦ they start doing a lot of other^✦ things. They advise^✦ companies.^✦ They go to conferences.^✦ Whatever.^✦ Focus^✦ is what made you successful^✦ in the first place. There are a lot of reasons people lose focus.^✦ But fight against^✦ that really,^✦ really^✦ hard.

This is a special^✦ case of focus.^✦ As you start to do well - you will start to get a bunch of potential^✦ acquires sniffing around.^✦ And it's very^✦ gratifying.^✦ You're like, "Wow! I can be so rich." And I'll be so cool. And MNA negotiations^✦ feel really^✦ fun. This is one of the biggest^✦ killers of companies.^✦ Is that they entertain^✦ acquisition^✦ conversations.^✦ You distract yourself.^✦ You get demoralized^✦ if it doesn't happen.^✦ If an offer^✦ does come in - it's really^✦ low. You've already^✦ mentally^✦ thought that you're done and so you take the offer.^✦ As a general^✦ rule don't start any^✦ acquisition^✦ conversation^✦ unless^✦ you're willing^✦ to sell for a pretty^✦ low number.^✦ Don't ever^✦ just check it hoping^✦ that you're going to have the one miracle high offer.^✦ If that's going to happen^✦ you’ll know because^✦ they'll just make you a big offer^✦ before^✦ you can meet them. But this is big company^✦ killer.^✦

And then - just a reminder to everybody^✦ - that things that kills startups^✦ at some level^✦ is the founders^✦ giving^✦ up. So sometimes^✦ you should quit but if you mismanage^✦ your own psychology^✦ and you quit when you shouldn’t, that is what kills companies.^✦ That is the final^✦ cause of death for most of these startups.^✦ And so if you can manage^✦ your own Psychology^✦ in a way that you don't quit - don't get to a place where you need to quit or give up on the startup.^✦ You'll be in a far far better^✦ place.

So "Marketing^✦ & PR" is something^✦ that we tell companies^✦ to ignore^✦ for a long time. Everyone^✦ thinks in the early^✦ days that the press is going to be what saves^✦ them. We tell them all the time it doesn't work that way. It’s definitely^✦ true. Press is not what's going to save your start up. But as you start to be successful^✦ - this is something^✦ that the founders^✦ themselves^✦ need to spend time on. So once your product^✦ is working^✦ - switch from not caring^✦ about^✦ this to caring^✦ about^✦ it a little bit. The two most important^✦ things for the founder^✦ to do - the founders^✦ to do - figure^✦ out the key messaging yourselves.^✦ Never^✦ outsource^✦ to your head of marketing^✦ or PR firm. You founders^✦ have to figure^✦ out what the message^✦ of the company^✦ is going to bet. And once you've set that it kind of sticks. Very^✦ hard to change this once the press decides how they’re going to talk about^✦ you.

The other^✦ thing is getting^✦ to know key journalists^✦ yourself.^✦ PR firms will always^✦ try to prevent you from doing this because^✦ they need to have a reason^✦ to to exist...^✦ And so they're like, "We're going to handle the relationship^✦ with the journalist.^✦ We'll just bring you in for interviews." No journalist^✦ wants to talk to a PR flag ever.^✦ They're so much happier^✦ to hear from to just hear from the founder.^✦ The biggest^✦ PR hack you can do is to not hire a PR firm. Just pick three or four journalists^✦ that you develop really^✦ close relationships with that like you. That understand^✦ you - which you get. Then you contact them yourself;^✦ they will cover^✦ every^✦ story^✦ you ever^✦ give them. And they'll actually^✦ pay attention^✦ and get to know you and care about^✦ the company.^✦ This is so much better^✦ than the normal^✦ strategy^✦ of having^✦ a PR firm blast 200 contacts that never^✦ read their emails with every^✦ piece of news. This is something^✦ that I think is important^✦ to start doing.

This is also^✦ the time in a company^✦ when business^✦ development starts to matter.^✦ And so in the early^✦ days you can basically^✦ ignore^✦ anything^✦ that would be like doing deals. Except maybe fundraising^✦ and sales.^✦ This is a time when they're important.^✦ And everything^✦ or many^✦ things that you do like even^✦ fundraising.^✦ It falls under^✦ the category^✦ of doing deals.

So there are - here’s^✦ my one minute^✦ crash course on this. There are five points that are important^✦ to understand^✦ here. We've talked^✦ about^✦ this a lot. Nothing^✦ will matter^✦ if you don't "Build a great product".^✦ So assume^✦ that you've done this before^✦ you go try to get anyone^✦ to do anything^✦ with you.

"Developing^✦ a personal^✦ connection"^✦ with anyone^✦ you're trying to do any^✦ sort of big deal with is really^✦ important.^✦ For whatever^✦ reason,^✦ most founders^✦ fail to this. Or many^✦ founders^✦ fail to do this. But no one wants to feel like they're this transactional^✦ thing. That you're using^✦ them to get distribution^✦ for your product^✦ or to raise money^✦ or whatever.^✦ So figuring^✦ out some way to actually^✦ care about^✦ this person^✦ and care about^✦ what you're doing with them. And not view them - you brave to in your own mind not just view them as this one off transaction.^✦ You have to actually^✦ care about^✦ them and what they're going to get out of this.

"Competitive^✦ dynamics" - this is a basic^✦ principal of negotiation.^✦ Most founders^✦ learn this the first time in fundraising.^✦ But it actually^✦ matters^✦ for everything.^✦ The way you get deals done and the ways you get good terms is to have a competitive^✦ situation.^✦ You don't do this deal with party^✦ A, you're going to do it with party^✦ B. It's not always^✦ an option^✦ but it usually^✦ is. And this is the single thing that makes^✦ deals happen^✦ and makes^✦ deals move.

Tyler^✦ talked^✦ about^✦ "Persistence"^✦ -- the last lecture.^✦ So I won't hit on that again^✦ too much other^✦ than to say you go beyond your comfort point here most of the time as a founder.^✦

And then the fifth point is that "You have to ask for what you want". This is another^✦ thing - I still have trouble with this and certainly^✦ most of the founders^✦ we do have. If you want something^✦ in a deal - just ask for it. Most of the time, you won't get laughed out of the room and might get it. But you have to be - at some point, you actually^✦ have to say, "You know this is what I'd like to do." Even^✦ if it feels aggressive^✦ or an over-reach or whatever.^✦

So I am going to close this part of the talk with an image.^✦ One of the Airbnb founders^✦ drew this on like a business^✦ card or something^✦ for another^✦ founder^✦ that starting^✦ a company^✦ and then I saw it once and took a picture^✦ of it. 'Cause I thought it was such a good summary.^✦ And what he had tried to draw here was the YCombinator^✦ process^✦ as he remembers it. I love it 'cause it’s like so simple and it looks so doable when it’s written^✦ on a business^✦ card. But you're trying to find product^✦ market^✦ fit. You're trying to build a product^✦ and you're trying to close the gap between^✦ those two gears. The only^✦ way to do that is to go off and meet the people. You can't do this without^✦ getting^✦ really,^✦ really^✦ close to your users.^✦ And then he drew this graph that sort of on a white board that at YC and gotten^✦ kind of sort one of the YC rites^✦ of passage.^✦ But that's the graph of how adoption^✦ goes for a new company.^✦

So you launch on the press. You get a huge spike. It falls off to nothing.^✦ At some point at least one point things look like they're going to completely^✦ die and kind of dip below^✦ the X access.^✦ They recover a little bit, you have this long, long troth of sorrow^✦ before^✦ things work. In Arabian B's case, it was a thousand^✦ days before^✦ the graph started^✦ taking^✦ upward.^✦ You have these wiggles of false hope. And then finally,^✦ finally,^✦ finally,^✦ finally^✦ things start to grow. Three years later.^✦ So starting^✦ a startup^✦ ends being this very^✦ long process.^✦ It is - it can be very^✦ rewarding. It's definitely^✦ long but it is doable. That's what I love about^✦ that drawing.

So with that. I have about^✦ ten minutes^✦ left. I can questions^✦ on this or anything^✦ else in the course that we've covered.^✦ If anyone^✦ has some.

Yes.

Audience^✦ member^✦ #1: You hold that diversity^✦ is important,^✦ but an earlier^✦ speaker said that diversity^✦ wasn't important^✦ and that you should just hire people that are very^✦ much like you and trust you...

Sam: So the question^✦ is how you square the device^✦ of diversity^✦ being important^✦ with earlier^✦ speakers saying that you want people that are very^✦ similar.

The difference^✦ is that what you want is diversity^✦ of backgrounds. But you don't want diversity^✦ of vision.^✦ Like where companies^✦ get in trouble is when they have people that think very^✦ differently^✦ about^✦ what the company^✦ should be doing or don't work well together.^✦ You don't want that. You do want hire people that you know and that you trust and that you can work with, but if everyone^✦ on the team comes^✦ from exactly^✦ the same background you do end up developing^✦ somewhat of a monoculture.^✦ Which often^✦ causes^✦ problems down the road. Not always.^✦ Some companies^✦ have been successful^✦ with that.

So what we tell people is hire people that you know and that you've worked^✦ with before.^✦ But try to hire people that complementary^✦ and aligned^✦ towards^✦ the same goal. Not people that are exactly^✦ the same. 'Cause you just get a better^✦ skill set.

Audience^✦ member^✦ #2: So what are some examples^✦ of ways to make up productivity^✦ on a personal^✦ level?^✦ How do you do that on a personal^✦ level^✦ and also^✦ on an advance^✦ level?^✦

Sam: How to keep track productivity^✦ systems.^✦ So, the one I use which I actually^✦ thinks works really^✦ well is I keep one piece of paper^✦ with my goals for sort of three to twelve month time frame. And I look at that every^✦ day. And then separately^✦ I keep one page for every^✦ day of my short term goals for that day. And so if I need to do something^✦ in like a week I just flip forward^✦ seven^✦ pages^✦ and I write down. And then I also^✦ keep a list of every^✦ person^✦ and what they're working^✦ on and what I need to tell them and what I need to talk to them about.^✦ What we talked^✦ about^✦ last time. So every^✦ time I sit down with someone^✦ I kind of the full state and a list of things for that person^✦ that works really^✦ well.

Audience^✦ member^✦ #3: So we talked^✦ a lot about^✦ the startups^✦ growing^✦ but most startups^✦ fail. Any^✦ advice^✦ for how to fail gracefully?^✦

Sam: Yeah. Yeah. Great question.^✦ We should have covered^✦ that.

How to fail gracefully.^✦ So, most startups^✦ fail and Silicon^✦ Valley^✦ almost^✦ goes too far on how it loves^✦ failure.^✦ Failure^✦ still sucks. You should still try not to fail. And this whole like thing of like "Ahh failure^✦ is great!" I don't agree with, but it will happen^✦ to most people most of the time and it's a very^✦ forgiving environment. As long as you are up front about^✦ it and ethical^✦ and don't let anyone^✦ get into^✦ bad situation.^✦ So if you're failing,^✦ first of all you should tell your investors,^✦ and second^✦ of all, you should not totally^✦ run out of money.^✦ What you don't want is blow up which a bunch of depths that the company^✦ owe and everyone^✦ showing^✦ up to work one day and the door being locked.^✦

You'll know when you're failing^✦ and you'll know the company^✦ - things just aren't^✦ going to work. And you should just tell you investors,^✦ "Like hey. Sorry.^✦ This isn't going to work." No one will be surprised. Like I expect to lose my - or I'm willing^✦ to lose my money^✦ on every^✦ investment^✦ I ever^✦ I make. I know that happens^✦ most of the time and the winners pay for it you know still with a factor^✦ of a hundred.^✦ And so it's ok, No one - people will be very^✦ understanding^✦ and supportive.^✦ But you want to tell people early.^✦ You don't want to surprise^✦ them. And you want - you don't want to like let your employees^✦ get shocked when they know they don't have job. You want shut the company^✦ down in a graceful way. Help them find jobs. Make sure you give the two or four weeks of severance^✦ payment so they're not suffering^✦ a cash flow problem.^✦ All that stuff is pretty^✦ important.^✦

Audience^✦ member^✦ #4: How many^✦ immigrant^✦ founders^✦ have you seen in YCombinator?^✦

Sam: How many^✦ immigrant^✦ founders^✦ have we seen in YCombinator?^✦ In the last batch - I think it probably^✦ went up for this next batch. In our last batch 41 percent^✦ of the founders^✦ we founded we're born outside^✦ the US. From thirty^✦ different^✦ countries.^✦ So it's a pretty^✦ big percentage.^✦

Audience^✦ member^✦ #4: I was just thinking^✦ - what do you think are the good places^✦ to start start ups?

Sam: Apart^✦ from the Valley^✦ where do I think are other^✦ good places^✦ to start a startup.^✦ Well I still think the Valley^✦ is the best by a very^✦ significant^✦ margin.^✦ But I think it's finally^✦ maybe beginning^✦ to weaken^✦ a little bit because^✦ the costs have just gotten^✦ out of control. To be clear - if I was going to start a company^✦ I still wouldn't think about^✦ it. I still will pick Silicon^✦ Valley.^✦ And think if you look at the data^✦ of companies^✦ of over^✦ the last few years that is to wins by a lot. But Seattle, LA - Lots of places^✦ outside^✦ the US - I think all of these makes^✦ sense.

Audience^✦ member^✦ #4: Like places^✦ outside^✦ the US?

Sam: I hesitate^✦ to make recommendations^✦ because^✦ I haven't^✦ spent enough^✦ time in the cities^✦ to really^✦ have an intuitive^✦ feel. But like - you know as well as I do the common^✦ ones^✦ people talk about^✦ start up hubs. I just can't make a personal^✦ recommendation^✦ there.

Audience^✦ member^✦ #5: So when should the founders^✦ start to thinking^✦ about^✦ hire a professional^✦ CEO - a senior^✦ guy?

Sam: When should the founders^✦ think about^✦ hiring^✦ a professional^✦ CEO? Never.^✦ You - if you look at the most successful^✦ companies^✦ in tech they are run by their founders^✦ for a very^✦ long time. Sometimes^✦ forever.^✦ Sometimes^✦ they even^✦ hire professional^✦ CEO and realize^✦ that is not going to like build a great company^✦ and so Larry^✦ Page came to be CEO again.^✦ I think if you don't want to be the long term CEO of a company^✦ - you probably^✦ shouldn't start one. I am not totally^✦ sure about^✦ that. I think there are exceptions.^✦ But generally^✦ that the transition^✦ that I talked^✦ about^✦ today^✦ if you go from build ing a great product^✦ to building^✦ a great company^✦ being a founder^✦ for nine of the ten years is going to be about^✦ building^✦ that great company^✦ and if you're not excited^✦ about^✦ doing that - I think you should think hard about^✦ it.

Audience^✦ member^✦ #6: What are some of the most common^✦ and alarming warning^✦ signs you should be looking for when you're trying to make the shift from building^✦ great product^✦ to building^✦ a great company?^✦

Sam: What are the most common^✦ mistakes^✦ to make when you're shifting to building^✦ a great company?^✦ I think I went through most of them here. I tried to put everything^✦ here that I see people mess up most of the time. Yes.

Audience^✦ member^✦ #7: Is there a way to get involved^✦ in the Yom community^✦ before^✦ getting^✦ accepted?

Sam: Is there a way to get involved^✦ with YC before^✦ getting^✦ funded?^✦ No and intestinally^✦ not. I say the one thing you can do is if you work at a YC company^✦ and then later^✦ apply^✦ - I think probably^✦ like - well not probably^✦ that definitely^✦ if you get a good recommendation^✦ from those founders^✦ will help with YC. So you know, working^✦ at a YC company^✦ helps but there's^✦ not much you can do to help. And that's intention.^✦ Like there is no pre start up in a way that there is premed.^✦ You should just focus^✦ on whatever^✦ doing and then when you start a start up - there are `things like YC and others^✦ that are structured^✦ to help you. Most of the founders^✦ we fund we don't know at all before^✦ we do it. You know you really^✦ don't need to get to knopw us or get involved.^✦ We're all good that way.

Audience^✦ member^✦ #8: The statistic you saying now harder^✦ to get into^✦ YCombinator^✦ than getting^✦ into^✦ Harvard. So I am curious^✦ the criteria’s that you use to pick up startups.^✦ Does it change over^✦ time?

Sam: The question^✦ is what criteria to pick startups^✦ and has it gotten^✦ harder?^✦ Has it changed?^✦ The two things that we need to see are good founders^✦ and a good idea.^✦ And without^✦ both of those we won't fund the company.^✦ But that hasn't changed.^✦ That is always^✦ been the case. The applicant^✦ pool to YC has grown quite a bit. But most of - a lot of the growth is people who shouldn't be starting^✦ start up anyone^✦ that are just do9ing it 'cause it is sort of the cool thing now. So you know if you're really^✦ passionate^✦ about^✦ an idea^✦ and the idea^✦ is good and you are smart and you get things done and your we executing - I still think you have a very^✦ reasonable^✦ shot at YC even^✦ though the headline^✦ number^✦ is bigger.^✦

Audience^✦ member^✦ #9: There's^✦ a certain^✦ market^✦ that you’re really^✦ excited^✦ about^✦ that don’t necessarily know all about^✦ yet - is there a certain^✦ track you recommend^✦ or ways to?

Sam: Sure - if there's^✦ a market^✦ that you’re excited^✦ about^✦ but don’t a lot about^✦ yet what should you do? Two schools of thought on this. One is to just jump right in. Learn it as you go. That's worked^✦ a lot of times.^✦ The other^✦ is go work at another^✦ company^✦ in the space or do something^✦ in the market^✦ for a year or two years. I lean slightly^✦ towards^✦ the second^✦ but as long as you are willing^✦ to really^✦ learn and really^✦ study^✦ and to get uncomfortably^✦ close to your users^✦ - either^✦ case would work. And I don't even^✦ thinks that it’s that much of a disadvantage.^✦ I think all things being equal^✦ go spend a couple of years learning^✦ about^✦ it in detail^✦ but I don't think you have to.

Audience^✦ member^✦ #10: I have a question^✦ related to YC - So I think YC did a fantastic job in promoting partnership in Silicon^✦ Valley.^✦ In fact, I plan to invest^✦ in some in the next three years. You guys pump 180 companies^✦ per year coming^✦ to the market^✦ it looks like its hard to follow^✦ each of the YC company^✦ any^✦ more. Do you think that this will create some - some people will walk away^✦ from YC because^✦ they cannot^✦ follow^✦ large batch of companies^✦ and the company^✦ had to be very^✦ polished and the firm had to be think of the world about^✦ ideas?

Sam: Alright^✦ so I think the question^✦ is do I think investors^✦ are going to fund less YC companies^✦ as we grow. No. Definitely^✦ not. Like certainly^✦ the trend in this is the other^✦ way. We have more and more investors^✦ saying that half their portfolio is not YC companies^✦ and they look forward^✦ to the day where it's three quarters. No I don't think that’s a problem^✦ at all. I think that so not on my top hundred^✦ problem^✦ list. The opposite^✦ of that maybe.

Alright.^✦ One more question.^✦

Audience^✦ member^✦ #11: When should a group of founders^✦ raise a seed round or Series^✦ A?

Sam: In general^✦ it's nice to wait until^✦ you have the idea^✦ figured^✦ out and initial^✦ signs of promise^✦ before^✦ you raise money.^✦ Razing^✦ money^✦ puts some pressure^✦ on the company.^✦ Sometime pressure.^✦ And once you've raised^✦ money^✦ you can't be in this exploratory^✦ phase in definitely.^✦ You end up having^✦ to rush and so like if you haven’t^✦ raised^✦ money^✦ and your idea^✦ is not working^✦ you can fall around^✦ and pivot^✦ until^✦ you really^✦ hit on the thing that’s working.^✦ But if you've raised^✦ money^✦ and your `idea^✦ doesn’t work - You're in this oh shit moment.^✦ And you have to pivot^✦ and you pivot^✦ to whatever^✦ vaguely^✦ plausible^✦ idea^✦ is. And that’s bad. So I think if you can wait to raise any^✦ outside^✦ capital more than say like a hundred^✦ or 200 thousand^✦ dollars^✦ even^✦ necessary^✦ - but ideally^✦ not even^✦ that. Until^✦ things are working^✦ or at least pointed in the direction^✦ of working^✦ you're way better^✦ off.

Alright^✦ thank you all very^✦ much! This was fun!

Technical Breakdown

9.3

Multisyllabic Rhymes9.5

Complexity of rhyme schemes (data-driven)

Internal Rhymes9.5

Rhymes within a line (data-driven)

Wordplay / Double Entendres0.0

Clever language, metaphors, punchlines

Cadence / Rhythm10.0

Flow variation and timing (data-driven)

Vocabulary Complexity7.0

Range and depth of words used (data-driven)

Delivery / Breath Control0.0

Performance and control

Computed Score9.27

Production

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Critic Analysis

RAPLEDGER BAROMETER™

The provided text is a transcription of a business lecture on startup management, not a lyrical verse by Killer Mike. Consequently, hip-hop poetics metrics cannot be applied.

A+

9.5

Multisyllabic

9.5

Internal Rhymes

Cadence / Flow

Vocabulary

Wordplay

Delivery

Rhyme Architecture: None. The input is prose lecture material.

None applicable to hip-hop analysis.

Input is a prose transcription of an entrepreneurial lecture, not a rap verse.

Lacks rhythmic meter, rhyme scheme, and poetic devices.

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Lyrics & Rhyme Analysis

Technical Breakdown

Production

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