Sam Altman, President of Y Combinator, recently published an excellent post called the Startup Playbook. As the leader of the largest and most prominent accelerator in the world, Sam has had the opportunity to work with thousands of entrepreneurs across hundreds and startups. Naturally, patterns, both good and bad, start to emerge and it becomes obvious what entrepreneurs should do.
Here are a few notes from the Startup Playbook:
Part I: The Idea
- Your goal as a startup is to make something users love.
- To have a successful startup, you need: a great idea (including a great market), a great team, a great product, and great execution.
- One of the first things we ask YC companies is what they’re building and why.
- Another thing we ask is who desperately needs the product.
- And it’s critical you understand your users really well—you need this to evaluate an idea, build a great product, and build a great company.
- We also ask how the company will one day be a monopoly.
Part II: A Great Team
- What makes a great founder? The most important characteristics are ones like unstoppability, determination, formidability, and resourcefulness. Intelligence and passion also rank very highly.
- The best founders are unusually responsive. This is an indicator of decisiveness, focus, intensity, and the ability to get things done.
- The best case, by far, is to have a good cofounder. The next best is to be a solo founder. The worse case, by far, is to have a bad cofounder.
Part III: A Great Product
- Here is the secret to success: have a great product. This is the only thing all great companies have in common.
- To do this cycle right, you have to get very close to your users. Literally watch them use your product. Sit in their office if you can.
- You also need to break things into very small pieces, and iterate and adapt as you go.
- 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?
Part IV: Great Execution
- The only universal job description of a CEO is to make sure the company wins.
- Growth and momentum are the keys to great execution. Growth (as long as it is not “sell dollar bills for 90 cents” growth) solves all problems, and lack of growth is not solvable by anything but growth.
- The prime directive of great execution is “Never lose momentum”.
- For anything you consider doing, ask yourself “Is this the best way to optimize growth?”
- Extreme internal transparency around metrics (and financials) is a good thing to do.
- You should set aggressive but borderline achievable goals and review progress every month. Celebrate wins!
- A related trap is thinking about problems too far in the future—i.e. “How are we going to do this at massive scale?” The answer is to figure it out when you get there.
- If I had to distill my advice about how to operate down to only two words, I’d pick focus and intensity.
- A CEO has to 1) set the vision and strategy for the company, 2) evangelize the company to everyone, 3) hire and manage the team, especially in areas where you yourself have gaps 4) raise money and make sure the company does not run out of money, and 5) set the execution quality bar.
- Among your most important jobs are defining the mission and defining the values.
- Hiring is one of your most important jobs and the key to building a great company (as opposed to a great product.)
- Don’t compromise on the quality of people you hire. Everyone knows this, and yet everyone compromises on this at some point during a desperate need.
- Do not hire chronically negative people.
- Value aptitude over experience for almost all roles. Look for raw intelligence and a track record of getting things done. Look for people you like—you’ll be spending a lot of time together and often in tense situations.
- A quick word about competitors: competitors are a startup ghost story. First-time founders think they are what kill 99% of startups. But 99% of startups die from suicide, not murder.
- 99% of the time, you should ignore competitors. Especially ignore them when they raise a lot of money or make a lot of noise in the press.
- The secret to successfully raising money is to have a good company.
- Remember that at least a thousand people have every great idea. One of them actually becomes successful. The difference comes down to execution.
- So all you need is a great idea, a great team, a great product, and great execution.
Every entrepreneur should read the Startup Playbook and learn from the Y Combinator experiences.
What else? What are some more thoughts on the Startup Playbook?