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Startup Class – Intro Notes on the YCombinator Class at Stanford

What is this Startup Class?

This is a phenomenal free course organized by Sam Altman, the President of YCombinator, with an express goal to teach “Everything we know about how to start a startup, for free, from some of the world experts.” The full course is well organized and broken down into guest lectures by some of the biggest entrepreneurial names in the entire business including Peter Thiel, Paul GrahamDustin Moskovitz and many more. The course videos and full annotated lectures are available here. I’ve found the classes to be of immense value. Not only are the speakers on point, but the assigned readings lead to an intricate web of articles and authors that talk about big ideas ricocheting throughout the startup world. I’ve listened to each lecture at least a few times already. It’s that good – especially the earlier lectures. Personally, I think the class is relevant for a broader audience than ‘just’ aspiring entrepreneurs. Why? Because startups have a myopic focus on creating new value in the world. That means startups can only survive and thrive over time if they solve a real problem. This makes both the outcome of startups and the process of startups pretty interesting from different perspectives, even if you’re not interested in being an entrepreneur yourself. That said, Altman caveats the entire course by saying these are principles that apply specifically to startups looking to achieve rapid growth and scale. They may not apply or work well outside of that context.

About These Notes

I’ve compiled my own notes to this course and am sharing them here. I think these notes do a decent job of distilling out the essential pieces of wisdom from of the course, but to be honest that’s not really my goal here. The course is pretty concise in and of itself. I really have two reasons for writing out these notes. First, I want to make sure I’m really internalizing these principles myself and this is a good way to do that. Second, as I already mentioned, this course draws on a huge body of thinking, but it doesn’t always reference how to drill down deeper into that body of knowledge–whether startup related or broader in terms of psychology or market dynamics or whatever. I try to make that a little easier by providing related links and resources and sometimes by combining relevant ideas across different lectures into one place. I also freely insert my own perspective and comments–these are my notes after all! One final caveat: all screenshots of the video images should be attributed to Stanford University and/or the guest lecturers that prepared the slides. Anyway, let’s get started with Lecture 1: An Introduction and overview by Sam Altman and ‘Why to Start a Startup’ by Dustin Hoffman.

Why To Start A Startup

Dustin, a Co-Founder of Facebook and the Founder of Asana, spends a bit of time debunking common reasons to start a startup and drilling on the key reason you should actually start a startup. FYI: In the actual lecture this actually follows Sam giving a brilliant summation of startup principles. Ultimately the key reason–the only reason–to start a startup, is that

“You can’t not do it. You’re super passionate about this idea, you’re the right person to do it, you’ve gotta make it happen.”

So either you have the drive and passion and mission to get this done or the idea is so huge that you have enough external fuel to light a fire and get it done to create immense value. This is a contrast to the four most common reasons for starting a startup:

  • It’s glamorous
  • You’ll be the boss
  • You’ll have flexibility
  • You’ll have the chance to make a bigger impact and make more money than at a mature company

Debunking these Startup Myths

Because it’s Glamourous: In reality, a startup is a lot of hard and not usually)very glamorous, work. It’s extremely stressful too. You have a lot of responsibility, an ever-present fear of failure, and you are always on call. Having people depend on you for their livelihood is a huge responsibility. Media and fundraising just add to the pressure. That’s why founder depression is such a real and serious thing to be aware of. Being a Founder is Hard Being a Founder Is Different: Other than hiding under your desk, being a founder is different than being an employee–even an early-stage one. As an employee if things aren’t going well you can walk away. If you do that as a Founder it’s a real black mark on your career that will follow you around. So by default you have to be more committed. You can’t hide and you won’t sleep much. That means that at a minimum it’s a 5 year commitment as a Founder. As Dustin says, “If you’re lucky and you have a bad startup idea you fail quickly, but most of the time it’s not like that.” Flexibility: Flexibility is best summed up by Phil Libin, the CEO of Evernote, when he says ”

If you’re going to be an entrepreneur, you will actually get some flex time to be honest. You’ll be able to work any 24 hours a day you want!”

Being the Boss: The myth of being the boss is again well captured in a Phil Libin quote:

Being a CEO is hard

Creating Change Hoffman then goes on to spend some time talking about financial rewards AND creating impact. The core idea here is that payoffs at a startup are pretty binary with a low probability payoff. First, the market and size of the company has to be large enough, say $100 million, to generate a big financial outcome for you as a founder when factoring in dilution. It is extremely difficult to actually generate a $100 million dollar company and a concurrently large payoff for yourself. In terms of impact on the world, there’s also pros for joining a later stage company. The creator of Google Maps for example, Bret Taylor, created massive global value but he did so because he was able to leverage world-class engineering talent, ample resources, and tap into a large existing user base to launch quickly. Still think you want to start a startup? Then start with Dustin’s recommended reading list: Hoffman reading list

For the second part of this lecture see the next set of notes

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Last modified: January 9, 2015