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One Order of Operations for Starting a Startup

64 pointsby jameshkabout 7 years ago

13 comments

mwseibelabout 7 years ago
Hello - I've been invited to some universities lately to talk to students about Y Combinator and the question "how do I come up with a good startup idea?" comes up every time. In this essay, I've attempted to write a guide for people with the same question. One thing I'll point out from the onset is that there are many paths to starting a startup and this one is not the only one (and probably not even be the best). While providing a possible path - my primary goal was to destroy some commonly held myths about "the right way" to start a startup. Even more specifically the idea that you need a "great idea" at the beginning. Happy to hear your thoughts and questions on the subject.
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kbuchananabout 7 years ago
Here&#x27;s a more cynical possibility: What if casting about for brilliant startup ideas is actually a signal that you are unlikely to be a founder, by DNA.<p>In my experience, founders simply can&#x27;t help themselves from starting things, regardless of how ridiculous (or great) their ideas are. There are obvious exceptions to this (for example, I wouldn&#x27;t include people who inherit businesses, who have a lot of startup capital, in this founder pool).
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dfabulichabout 7 years ago
This post doesn&#x27;t mention when to sign an operating agreement with your co-founders and legally form a company.<p>IMO, the answer is: you should have a signed equity agreement before you start working on the MVP, and and you <i>must</i> have one by the time you finish working on the MVP.<p>In practice, you&#x27;ll probably need to incorporate a business to build your MVP. If you&#x27;re accepting money from customers, the company should accept their money, not a co-founder directly. (Y Combinator recommends a Delaware C Corp.)<p>Even if you&#x27;re just spending money, maybe at first one of the co-founders can fund it out of a personal bank account, but it&#x27;s way better to have a business with its own bank account and operate the business out of that.<p>Your MVP isn&#x27;t really viable unless your co-founders have signed an agreement. Sign one, early.
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mattbiernerabout 7 years ago
My problem: lots of ideas and enough technical skills to make them happen, no idea how to build any initial buzz even with an mvp. Even when I try researching upfront, asking friends and family about problems and potential solutions, most of the responses are like, “well that could be cool I guess.” I’m not sure if this is a sign that I haven’t been coming up with the right ideas, or iterating enough, or that I just suck a selling (or perhaps all three).<p>Any suggestions?
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startupdiscussabout 7 years ago
&gt; &quot;There are a lot of counterexamples to the “failure” scenarios I described above, both for first time and repeat founders.&quot;<p>As a reminder the two failure scenarios are (1) idea -&gt; pitch -&gt; raise -&gt; start company and (2) non-technical team.<p>What are these counter-examples? I can&#x27;t think of any, although I have the vague feeling they must exist. In particular, counter examples to (1) must exist since the MVP&#x2F;lean&#x2F;validate idea wasn&#x27;t as prevalent even 20 years ago, and counter examples to (2) must exist especially outside of technical startups where there are other moats.<p>Can you think of some?
stanleydrewabout 7 years ago
This is good advice. It is sometimes preferable to start with the right people though, and together explore various problem spaces.<p>In reality this isn&#x27;t much different from the reverse order, since usually you find out what kinds of problem spaces are interesting to you from talking to friends.<p>Great people that you work well with come around way less often than reasonable ideas in my experience. So I think it makes sense to prioritize finding the people rather than finding the problem space.
brucephillipsabout 7 years ago
The biggest advice I&#x27;d add is to talk to users <i>before</i> buidling your MVP. You can potentially save yourself a lot of work.<p>Also, there&#x27;s a ton of details in how to identify risks and validate assumptions. Four Steps to the Epiphany is a good tactical book on how to do this.
Cenkabout 7 years ago
Slightly related, the Startup Podcast has two great episodes on Justin.tv: <a href="https:&#x2F;&#x2F;www.gimletmedia.com&#x2F;startup&#x2F;almost-famous-season-3-episode-1" rel="nofollow">https:&#x2F;&#x2F;www.gimletmedia.com&#x2F;startup&#x2F;almost-famous-season-3-e...</a>
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wcchandlerabout 7 years ago
Thanks for this!! I’ve started pitching my idea to incubators and accelerators (cold) but now I don’t think I’ve done a well enough job of showing progression beyond the idea phase. Time to start making my software more publicly accessible. Scary. Can’t wait though. :)
Zaskodaabout 7 years ago
I have a lovely blockchain idea but don&#x27;t really know an appropriate person to deep dive with on it. <i>sad face</i>
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hxta98596about 7 years ago
Hey Michael, nice article. I saw in a comment you said students frequently ask you &quot;how do I come up with a good startup idea?&quot; and I know in the article you also included &quot;This by no means the only path to an MVP...but it is a path that I’ve seen work for a number of YC companies.&quot;<p>I wanted to share something tangential that has worked for me as I also speak to students regularly and get the exact same question every time. My response includes the standard &quot;Is there a problem you are passionate about?&quot;. But I&#x27;ve also observed how many students don&#x27;t see problems as &quot;problems&quot; when asked to brainstorm about it and many would-be entrepreneurs end up left out of the process and discussion. I&#x27;m not sure all the reasons why but maybe a pain point isn&#x27;t significant enough for them to label it a &quot;problem&quot; in their head when asked (&quot;oh that&#x27;s just an inconvenience not a real problem&quot;). Or maybe their personality leans toward accepting status quo without realizing it can be changed and they can be the ones to change it. Or maybe they are too shy or introverted at first to describe and complain of a problem out loud.<p>So I&#x27;ve modified my response to students a bit to include: I have seen startup ideas come from 1. An idea for a solution to a problem and 2. An idea for something &quot;that would be awesome&quot; if someone created it but no one has yet or at least not done a good job of it. Here&#x27;s what I mean by &quot;that would be awesome&quot; ideas, to take the example of Justin.tv, it leads to the same startup being created but 2 different types of entrepreneurs might get there by thinking:<p>1. <i>What&#x27;s a problem you experience and want to solve</i>: &quot;TV used to be entertaining but TV shows now feel stale, boring and with writing that feels so formulaic.&quot;<p>2. <i>What is something &quot;that would be awesome&quot; if someone created it</i>: &quot;I love TV and movies, The Truman Show is one of my favorite movies, <i>it would be awesome</i> if someone made a TV show for based on following someone&#x27;s life similar to The Truman Show but for real and with real people not actors&quot;.<p>Same startup. Two ways to get there. Hopefully this all makes sense. I&#x27;ve had good results engaging with students by adding the &quot;that would be awesome if that existed&quot; to the ways to think of startup ideas. This especially true with students who are shy or less likely to complain about problems out loud for some reason as well as for students who know how lucky they are to be at a fancy university in a first world country and they feel guilty describing anything as a problem worth solving if it isn&#x27;t on the level of world hunger or similar (in which case I encourage those students to go solve world hunger if that&#x27;s what they want to do).<p>Also one more thing. In my opinion the real major problem for aspiring entrepreneurs, bigger than coming up with a problem to solve, is how to brainstorm!<p>Most people assume brainstorming is just &quot;sit and think&quot;. And it can be that and some people are very good at that (and other people aren&#x27;t good at sit and think brainstorming at all but they just get lucky and a good idea pops in their head one day). But there&#x27;s a lot of literature out there with research on <i>effective brainstorming</i> as well as tips and tricks to get one&#x27;s brain into a better brainstorm mode (hint there&#x27;s a reason why so many people say their best ideas come while showering or jogging). I am outside the valley so your mileage may vary over there but I see <i>guided</i> brainstorming sessions work much better than the usual casual &#x27;shoot the shit type brainstorming&#x27; for the majority of people as brainstorming doesn&#x27;t come naturally to them. Hence everyone has 99 problems and no good ideas.<p>The most popular thing I do when talking to students is a class discussion to come up with a problem and get the entire group of students brainstorming and iterating solution ideas together, with the goal being &quot;find the first 5 feasible but bad solutions&quot; (Asking them to come up with a &quot;good solution&quot; is too much pressure and then no one wants to raise their hand to say an idea others in the group might think is bad, so it helps to make clear it&#x27;s OK we don&#x27;t need good ideas at this point). Another thing that helps is I hand out index cards to start things and get students to anonymously write down one &quot;problem to solve&quot; idea or one &quot;That Would Be Awesome&quot; idea. I collect the cards and pick the idea that best facilitates brainstorming and discussion to start things off and then do guided brainstorming together. Most students have never been part of a real brainstorming session beyond some brainstorming how to do a group school assignment that gets an A and isn&#x27;t too much work for everyone and that really they don&#x27;t care about. Real brainstorming is hard and they have never done it for real in a group setting.<p>Sorry for the long comment. Just wanted to share something that has worked for me getting more students more involved in entrepreneurship, especially for the types of students who currently are under-represented among the population of founders these days for whatever reasons. Yes. Also shout out to my fellow shy introvert founders and anyone who doesn&#x27;t walk around all day thinking about problems or like complaining about them. It&#x27;s OK to start a company with the goal to make something awesome a reality, everyone has 99 problems and zero good ideas, try thinking up something awesome instead.
Invictus0about 7 years ago
Using Airbnb as a reason why your idea doesn&#x27;t matter is like using Bill Gates as an argument for dropping out of college. The idea is super important; in Twitch&#x27;s case, the process of getting to that idea was putzing around with something terrible for a while. Ideas do matter and you&#x27;re not doing anyone any favors with this quixotic reductionism.
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graycatabout 7 years ago
I was looking for more &quot;operations&quot; closer to the day of nicely positive earnings.<p>Idea? Had that. Started with a problem that essentially every Internet user in the world has and that so far is solved piecemeal, with poor means, and, net, at best poorly. For a solution, the first good solution, and what should be a really good solution, invented one based on some original applied math based on some advanced pure&#x2F;applied math prerequisites. The applied math makes good progress on the <i>meaning</i> of Internet content.<p>Team? Just me.<p>Technical Founder? Just me. I&#x27;ve been in applied math and computing for a long time, have written a lot of code. Did applied math and computing at IBM&#x27;s Watson lab in an AI project. Once at FedEx quickly wrote some code that scheduled the fleet, alleviated some severe concerns of the BoD, enabled some crucial funding, and saved the company. My Ph.D. dissertation research was in stochastic optimal control. Since in that field, commonly the computational demands are absurdly high, some good computational experience was important. So, I made some progress in computational algorithms and wrote and ran some code that had the computational demands quite reasonable. Have written a lot of other successful code otherwise, especially for US national security.<p>Code? So, with my idea, I designed and wrote the code. To users, my work will be just a Web site. So, I needed to write the code for the Web pages. And the Web site needs to make some use of relational database and also, of course, my applied math. So, for the coding, I selected Windows over Linux and there selected the .NET version of Visual Basic (apparently essentially just a different flavor of syntactic sugar compared with C#). I designed the software and server farm architecture: There are several programs that communicate over a server side local area network (LAN). The communications are based on TCP&#x2F;IP and de&#x2F;serialization of object instances. One of the server types is for the Web pages. The software architecture is so that there is no <i>session affinity</i> between a particular user and a particular instance of a Web server, and for this there is a session state server; I could have used Redis but, instead, wrote my own based on just two instances of a .NET collection class. For the code for the Web pages, used ASP.NET. For the code for the database access, used ADO.NET. My code has about 24,000 programming language statements in about 100,000 lines of typing. So, about 76,000 lines have comments. So, the code is well documented, with the comments and with various external documents. The applied math is documented using D. Knuth&#x27;s mathematical word processing software TeX. The code appears to run as intended: So far I know of no bugs. The code doesn&#x27;t need refactoring. Execution timings show that the code is nicely fast. The code is for a serious service and company and not merely a <i>minimum viable product</i> (MVP). I wrote all the code.<p>The next operations I have in mind are (1) tweak the code to make a few small changes, (2) for the code for the crucial applied math, do some severe testing a third time, (3) gather a lot of data for the database, (4) do an alpha test and tweak the code as advisable, (5) do a beta test, (6) arrange to run ads, (7) get publicity, users, revenue, and earnings.<p>There are some user interface (UI) and user experience (UX) features: (1) There is no use of HTTP <i>cookies</i>. (2) The Web pages are simple; the pages should load quickly since the largest page sends for just 400,000 bits. (3) I wrote no JavaScript; Microsoft&#x27;s ASP.NET wrote a little JavaScript for me, likely for some aspect of cursor positioning, but for the users enabling JavaScript is optional. (4) The site is interactive, but the UI is simple. (5) Many users should find the UX fun, somewhat game like. A good user might spend a hour a week using the site. That much time per week for a significant fraction of all developed country Internet users would be a lot of usage, Web pages and ads sent, and ad revenue.<p>The latest is that my development computer developed some data corruption and finally quit. I ordered parts for a new development computer and first server. So, I got an Asus motherboard, an AMD FX-8350 processor (8 cores at 4.0 GHz), 16 GB of ECC (error correcting coding) main memory, etc. As of yesterday, the system boots and runs the power on self test (POST) and BIOS (basic input&#x2F;output) code successfully; the BIOS finds the details on each of the motherboard, the processor, the one disk drive installed so far, the CD&#x2F;DVD device, etc.<p>The OP seemed to concentrate on the earlier operations I&#x27;ve already done, that is, the idea and the ability to design and write code, but the operations from the running code to good earnings also stand to be important.<p>For venture funding, I found that all the well known venture firms in Silicon Valley, Boston, NYC, etc. were not at all interested -- e.g., nothing about the description here is of any interest at all. So, I funded this work from my own checkbook and am 100% owner. Maybe once I have, say, $250,000 a month in revenue, some venture firm would be interested, say, write me a Series A check for $5 million. But with $250,000 a month in revenue, cash won&#x27;t be a bottleneck; I won&#x27;t need their check and won&#x27;t want to take on the overhead and risk of a BoD, and won&#x27;t accept their check. I got no meaningful response at all from YC. That I am a sole, solo founder seems to be a big negative for venture firms and YC.<p>Should I be able to be a sole, solo founder of a successful company with no equity funding? Sure: In the US, border, villages, town, and cities, people do that by the millions in pizza carryout, auto body repair, .... Should I be able to be successful as a sole, solo founder of a Web site business? Sure: The founder of the romantic matchmaking site Plenty of Fish did that.
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