How to Start a Startup - Lecture 2 Notes

How do I identify markets that are growing quickly? One big advantage that students have. Trust your instincts on this. Young people get older and become the dominant market. What are you using? What are people your age using?


Cofounder relationships are the most important in the entire company.#1 cause of early death of startups = cofounder blowups. Finding your cofounder is the most important decision. Students tend to be very bad at this – they randomly pick people. You wouldn’t hire like this so why choose your cofounder like this?

Meeting cofounders is easiest in college. Also good to work at interesting companies – google, etc is cofounder rich. Top 20 most valuable YC companies have at least 2 founders.

What do you look for in cofounders? Find people that are relentlessly resourceful – look at PG’s essay. Look for cofounders that are unflappable, tough, decisive, etc. The model for this in pop culture is James Bond. Find people like James Bond.

Make sure you’ve known your cofounders for a long time. Also true for early hires. Take advantage of school. You need tough and calm cofounders. Obviously also smart, but people don’t prioritize tough and calm, especially if you aren’t. Always need at least a technical cofounder. For YC 2-3 is ideal.

Try not to hire. High employees = complexity, high burn rate, etc. Lean = GOOD. In the beginning, only hire when you desperately need to. Cost of getting an early hire wrong is very high. Often kills company. AirBnB spent 5 months interviewing people before hiring their first employee. Early hires will define your company.

When you’re hiring, you should get the best people. It is very hard to recruit – the best people have many great options. It can easily take a year to recruit. Convince people that your mission is extremely important. The best people know they should join a rocket ship. The best people will wait for a breakout trajectory until they join. Either spend 0% of time or 25% of time hiring.

Mediocre people do not build great companies. A single mediocre hire in the first 5 will kill the startup. Will I bet the future of the company on this single person?

Where do you find people to hire? Early hires – people you know. Personal referrals are the trick to hiring, even if it’s uncomfortable. Also look outside Silicon Valley – it’s way too competitive.

Experience matters for some roles and not others. Doesn’t matter too much for early hires.

3 things to look for: * Are they smart * Do they get things done * Do I want to spend a lot of time around them?

If you haven’t worked with this person before, then you should work with them on a small project for a few days. Most first time founders are horrible interviewers. If you do interview, ask about previous projects. Also make sure you call references. Really dig in on what they did, etc with their references.

They also need:

  • Good communication skills
    • If someone can’t communicate clearly, it’s a real problem
  • Risk taker. Find people that like risk.
  • Manically determined
  • Describe every employee as an animal – you need unstoppable people, people that are just going to get things done.
  • Find people that you would feel comfortable reporting to

Employee Equity: * ~10% of the company to the first 10 employees. * Either way it vests, and if they’re good, then they’re going to add way more value. * For some reason founders give more equity to investors and less to employees

After you hire employees, you have to retain them. Founders get this wrong very often. Make sure your employees are happy and feel valued. This is a big reason why big equity grants are important. Don’t tell your employees they’re fucking up every day unless you want them to leave. As a founder, this is your natural instinct. You have to let your team have all the credit for all the good stuff, and you take the fall for the bad stuff. Don’t micromanage. As a first time founder, you are likely to be a very bad manager.

Fire fast. Firing people is one of the worst parts of running a company. Every first time founder waits too long and hopes an employee will turn around. It’s so painful and so awful that everyone gets it wrong. Also fire people that create office politics and is consistently negative. Both are very toxic to the company.

How do you balance firing fast and making them feel secure. Everyone screws up once or twice, but if they get every decision wrong, that’s when you need to act. At that point, it’ll be painfully aware to everyone. In practice, there is never any doubt.

When should cofounders decide on the equity split? Many cofounders like to leave this off for a very long time. This doesn’t get easier with time. You want to set this very soon after you start working together. Should be near equal. If you aren’t willing to give the cofounder an equal share of equity, then you should think about whether you want to actually work with this person.

What happens when you’re relationship with your cofounder falls apart? Every cofounder has to have vesting. This pre-negotiates what happens if one of you leaves. Typically 4 year vesting cycle with a 1 year click. If you don’t, you have a dead weight in the equity table, and it will fuck up everything – especially investment. YC won’t fund a company that doesn’t have vested equity.


Being a founder means signing up for years of grinding. You can’t outsource this. Everything in a startup gets modeled after the founders – culture is what the founders do.

A big part of execution is just putting in the effort.

CEO has five jobs:

  • Set the vision
  • Raise money
  • Evangalize
  • Hire and manage
  • Make sure the entire company executes

Two parts of getting things done: Focus & Intensity


Focus is critical. 100 important things competing for your attention every day. A lot of things that founders think are important actually aren’t. Figure out what the 3 most important things are, and only do those.

Founders are people that are excited about starting new things which is why focus is so difficult.

  • Say no a lot
  • Set overarching goals. Repeat them.
  • Communicate – can’t be focused without great communication
  • Maintain growth and momentum
  • Work together in person

Often companies get distracted by their own PR. Articles are good for growth.


You need extreme focus and extreme dedication. You can have a startup and one other thing, but usually not one. You need to be willing to outwork your competitors.

A small amount of extra work on the right thing makes a huge difference. Working at 1.01 ^ 365 vs 0.99 ^ 365 is 37.78 vs 0.02.

Intensity is:

  • Relentless operating rhythm
  • Obsession with Execution Quality
  • Bias towards action

“Move fast and break things” BUT make sure you know where to keep quality high.

Indecisiveness is a startup killer. You need a bias towards action. Every time you talk to good founders, they’ve gotten new things done.

You can do huge things in incremental pieces. If you keep knocking down little pieces, eventually it’s a huge thing.

Always keep momentum. Momentum and growth are the life blood of startups. If you ever take your foot off the gas pedal, things will spiral out of control. For most software startups – always keep growing.

Sales fix everything in a startup. If you have momentum sag, you’ll notice that the company starts internally fighting. When there’s disagreement in the team, you ask your users.

Keep momentum by setting an operating rhythm

  • Ship product
  • Launch new features
  • Review/report metrics and milestones.

Use your board to get your company to care about metrics and milestones.

Often competitors disrupt momentum – especially when they get PR. Don’t worry about competitors at all until their product is beating yours.

“The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time” – Henry Ford.