As you know, I’m all about building new projects, new startups, new communities, and new ways of building revenue for ourselves! If 2020 was the year where we realized that we needed to build our own thing…
… then 2021 is about building that very thing — the project, business, startup, and/or community of your dreams. Nothing short of that is acceptable, especially if you’re part of our
Consequently, I’ve been collecting resources for folks to use and just last week Alexis Ohanian, the founder of Reddit, shared that Knowable opened up their “Launch a Startup” course for free!
I jumped in and realized that it’s quite a bit of resources — 6+ hours of course material! And yes, I sat through all of it!
I wanted to capture this amazing resource for folks in a more-simple way…
… you know what’s coming! It’s another YEN.FM
#breakdown! I’ve captured the entire course for you so that you can come back at any time and walk through it (via text) — hope it helps!
My plan is getting a few groups of folks together in 2021 and walking through this material together — stay tuned for more details on this via YEN.FM!
Launch a Startup: Overview…
Starting a company is hard in the best of times. Starting one today might seem downright impossible. It’s not. Era-defining businesses like Instagram, Slack, and Uber were all born into down economies.
And even as the world turns upside-down, new opportunities are emerging for smart entrepreneurs. In this course, Reddit’s Alexis Ohanian, Everlane’s Michael Preysman, and a team of Silicon Valley experts teach you how to responsibly prepare for the possibilities and challenges of building your own company.
They’ll walk you through the steps of launching a high-growth startup and provide you with winning strategies for drafting your business plan, securing funding, developing your product, and much more.
Launch a Startup: You’ll Learn How To…
- Generate business ideas
- Evaluate competitors
- Draft a business plan
- Build and test your product
- Get user feedback
- Find a co-founder
- Build your brand
- Grow your community
Launch a Startup: Expert Teachers…
- Alexis Ohanian is the co-founder of Reddit, one of the world’s most influential websites. He’s also the co-founder of Initialized Capital, a VC firm with investments in companies like Instacart and Coinbase.
- Michael Preysman is the founder and CEO of Everlane, the hugely popular fashion retailer that has legacy brands like J. Crew and Banana Republic playing defense.
- Eddy Lu is the co-founder of GOAT, the sneaker marketplace that raised $100M from Foot Locker in 2019.
- Éva Goicochea is the co-founder and CEO of Maude, a modern sex essentials company touted by Vogue that’s reframing the conversation around sex.
- Ben Jacobs is the co-founder of Whistle, a pet tech company known as the “Fitbit for dogs” that was acquired for more than $100M by Mars Petcare.
- Tracy Lawrence is the co-founder and CEO of Chewse, a food catering company that’s raised more than $30M while building a unique and widely-admired company culture.
- Greg Bettinelli is a Partner at Upfront Ventures, LA’s most prolific venture capital firm. Upfront portfolio companies include Bird, Ring, and FabFitFun, just to name a few.
- Peter Werner is a partner at Cooley LLP, one of Silicon Valley’s go-to law firms. Peter has worked with hundreds of startups, including Allbirds, Opendoor, and Salesforce.
- Nancy Miller is an editorial director at Pop-Up Magazine Productions, former senior editor at WIRED, and former editorial director at Fast Company.
Okay, let’s jump in.
Part 1 is just a simple introduction — you can get that for free when you register and boot it up into your headphones.
Part 2 is where we really start, although, it’s still very much high-level.
For instance, here’s some of Part 2…
Part 2: About This Course
Consider this your unfair advantage. Consolidating the hard-earned wisdom of founders, million dollar investors, and other sages from across the startup spectrum, Knowable’s How To Launch a Startup is a tactical, step-by-step guide designed to take you through the process of launching a high-growth startup — forged from the feats and foibles of the folks who’ve been there.
Over the next few hours, we’ll take you through the brass tacks of the startup cycle — an A to Z immersion into the lessons sure to impact every would-be founder.
What you’ll learn
- We help you answer the big questions, like “How do I validate my idea?” and “How do I find investors?” — plus the questions you might not know you needed to ask, like, “How much money should I save before leaving my day job?” and “Should I go 50/50 with my co-founder?”
What you’ll need
Knowable isn’t in the get-rich-quick business. Our curriculum is designed with ease-of-use in mind, but we ask that all students come to class prepared with the following:
- An entrepreneurial appetite
- An industrious attitude
- A decent pair of headphones
- Lessons are presented in a variety of shapes and sizes — easy-to-follow tutorials, illuminating firsthand accounts, and more — with each concluded by Alexis Ohanian’s key takeaways.
- Knowable courses are designed for listeners — there’s no need to look at your screen to get the full experience.
- You don’t have to take notes — we’ve included a trove of supplemental material in the Knowable app, including comprehensive lesson summaries, curated reading lists, recommended resources for founders, a PDF study guide, and more.
- Don’t worry about tests or homework — they’re not a part of Knowable courses. But if you want tips on how to put course instruction into action, we’ve included optional prompts, activities, and action items in your study guide. No pressure.
Part 3: Are You Founder Material?
Startups are hard. Here, we get real about the challenges, risks, and rewards of being a founder.
- Founders must be prepared to make sacrifices. Forget about the creature comforts of conventional employment. Forget about structure. Forget about your dynamic social life.
- Consider the Spider-Man Principle: Great Power = Great Responsibility. As a founder, the health and viability of your company rests firmly on your shoulders; risk and uncertainty are integral to the entrepreneurial journey.
- The two key attributes every successful founder must possess: vision and relentless optimism. Diagnose a stubborn problem, believe in your solution, and be able to communicate it effectively to your employees, customers, and investors. Confidence is contagious.
- You’re going to make a lot of mistakes. A lot. Learn from what doesn’t work, adjust accordingly, and keep moving forward. Great founders are relentless, driven by the desire to make the world a little bit better for their customers.
- On the plus-side: the barrier to entry for startup entrepreneurship has never been lower. Investors are increasingly looking outside of traditional tech hubs for new talent, software is evolving to help democratize the product development process, and though there’s still a long way to go, a growing number of investment funds are dedicated to bankrolling companies founded by historically underrepresented makers.
Still with us? Good. Still not sure if you’re the founder-type? Let’s address some of the common misgivings facing would-be startup founders.
- “I don’t have enough money to start a company.”
Good news: it’s never been less expensive to get a company off the ground. There are countless variables that factor into a business’ basic bottom line, but as a rule of thumb, you should expect to spend at least five thousand dollars in your first year for the most basic of bootstrapped products.
- “I don’t know how to code.”
Until recently, a lack of tech prowess might have been insurmountable. Thankfully, powerful new software platforms have made it possible for founders to bring a polished, affordable MVP to market quickly — no coding necessary. We explore this further in Lesson 7 – What if I can’t code?
- “I don’t have an idea.”
The idea is merely a starting point. Most rookies overemphasize the importance of the world-changing idea, but it’s process that’s paramount — the execution and evolving iterations of your idea. It’s likely the key components of your idea will change as you learn more about your users and the problem you’re solving.
- “I don’t have any business training.”
Formal business training isn’t required to start a business — the nuts and bolts of business operations can be learned as you go. In the early stages of this work, your focus should be on understanding your customer, building your product, and getting it in front of as many people as possible.
- “I already have a full-time job.”
That’s what nights and weekends are for! Many great companies have started as side projects. More on this in Lesson 10 – Going full time.
- How to be successful | Sam Altman
- Do things that don’t scale | Paul Graham
- The founder’s guide to discipline: Lessons from Front’s Mathilde Collin | First Round Review
Suggested reading for aspiring founders
- The Hard Thing About Hard Things | Ben Horowitz
- Zero to One | Peter Thiel with Blake Masters
- The Lean Startup | Eric Ries
- Crossing the Chasm | Geoffrey Moore
- Start with Why | Simon Sinek
Part 4: High-Growth Startups
Here, we examine the key characteristics of high-growth startups, and how to avoid common blindspots before they turn fatal.
The high-growth startup
Throughout this course, we’ll be discussing the formation of a particular kind of company: a high-growth startup.
What separates a high-growth startup from the average small business is the concept of scalability — meaning, the cost of producing a single unit of a product or service must decrease over time, so that each additional dollar of revenue costs less than the previous one. It’s the difference between the business models of your corner dry cleaners and, say, “Uber for dry cleaning.”
Funding a scalable startup
If you’re building a scalable business, you’ll likely need to raise funds. High-growth startups typically depend upon angel investors, venture capital firms, or incubator/accelerator programs for this initial seed money, and venture investors are generally interested in highly scalable startups — companies with exponential ROI potential.
The old rule of thumb among Silicon Valley venture capitalists is that for every ten companies you invest in, seven of them fold, two return your investment, and one, if you’re lucky, becomes the success that makes up for the rest.
Now, let’s take a look at some of the common causes for startup failures and how to avoid them.
- The wrong team. A team lacking in essential skills, business expertise, or a shared vision.
Solution: A diverse team comprised of members with complementary skill sets, a shared vision, and the ability to execute is hands down the most important element in a successful startup. Strategic and influential advisors and board members make great teams even better.
- Poor concept. This can include a fundamental misunderstanding of the market, an inability to monetize a product, or a naiveté regarding legal obstacles.
Solution: When founding a company in a given market, there’s nothing as valuable as on-the-ground experience. While it’s not impossible to enter an unfamiliar market and find success, knowing the landscape and the players (in the intimate ways you can’t learn by researching online) will give your team an important head start. This is something investors look for.
- Poor execution. Even great ideas can fall prey to pratfalls in any number of areas: product development, sales, marketing, financing, operations, human resources, and more.
Solution: It might go without saying, but if your product or service blows the competition out of the water, you’re in pretty good shape. That said: nothing beats market due diligence.
- Financial pressure. Examples include: lack of cash to cover operations, absence of revenue, a miscalculation of customer acquisition costs relative to customer lifetime value, etc.
Solution: Resource access. This might mean access to capital at a crucial early stage, access to real estate or equipment, ownership of intellectual property, and so on. Founders who invest their own money have an extra incentive to succeed — this is something investors like to see.
- Inflexibility. A lack of resilience in the face of unforeseen circumstances.
Solution: Startups rarely go according to plan. An ability to roll with the punches and adapt when necessary is important for all fledgling companies. Knowing when it’s time to throw in the towel can be just as important. Many of today’s most valuable companies faced existential crises that could have resulted in failure under different leadership.
- Growth mismanagement. It may sound counterintuitive, but rapid growth can be a founder’s worst enemy. Miscalculating resources or misplacing attentions can lead to critical issues.
Solution: Founder due diligence. Plan and pay attention to get the curves up ahead, and try to anticipate issues before they materialize.
- Founder conflict. Ambiguous responsibilities and expectations, company direction, share ownership, etc.
Solution: Talk to a lawyer early to get ahead of these issues by documenting ownership and setting expectations at the very beginning of the business journey. (See also: Lesson 10 – Co-founders)
- Demoralization. A lack of conviction and team perseverance in the face of hardship.
Solution: Startups rarely go according to plan. An ability to roll with the punches and adapt when necessary is important for all fledgling companies. It may go without saying, but persistence and a refusal to throw in the towel are just as important. Many of today’s most valuable companies faced existential crises that could have resulted in failure under different leadership.
- Startups in 13 sentences | Paul Graham
- The 18 mistakes that kill startups | Paul Graham
- Startup=growth | Paul Graham
- Make no little plans — defining the scalable startup | Steve Blank
- Startups advice, briefly | Sam Altman
- How to decrease the odds your startup fails | Mark Suster
Part 5: Your Idea
Every great company was started the same way: with an idea. Don’t have one yet? Here, we discuss the process of generating, developing, and validating business ideas.
There’s no science to inspiration, but consider the following if you’re struggling with your big idea.
- Mine your frustrations. The best businesses solve problems — why not solve your own? The seeds of many great companies have been sown by a founder encountering something personally annoying — and deciding to fix it themselves.
- Consider your own interests and hobbies. Leave room for your personal taste for ideas — you’ll likely find more satisfaction in building something you would use yourself.
- Find your people. Community matters. Seek out work that inspires you, and introduce yourself to the people who are making it happen. Not only can you forge valuable connections, it can be a tremendous source of support and inspiration.
- Switch it up. Disrupt your personal routine. When you expose yourself to new people, places, and experiences, it helps expand your perspective.
- Read. Widely and deeply. Be insatiably curious about the things that interest you.
- Travel. If you have the budget for it, leave your city, leave the country, leave your comfort zone. Sometimes the best way to get inspired is by getting lost.
Now that you’ve settled on your million dollar idea, it’s time to make sure it’s bulletproof. Can you answer the following questions with confidence?
- Does your business solve a real problem?
- What do you know about the industry and market that you’re entering? The more you know, the better.
- What expertise is required to get to market? Knowing what you don’t know is every bit as important as knowing what you do know.
- Is your product or service scalable? Is it repeatable? Can you get started relatively cheaply-slash-easily?
- What is the revenue model? Will people pay for your product or service? Can you make money through third-party entities?
- Does your idea require regulatory acrobatics or tricky legal navigation? If so, be prepared for the added complexities.
- What’s your niche? Get clear about it. The more specific, the better.
- Who is your competition? And can you offer something that is dramatically better?
Once you’ve thoroughly vetted your idea and dialed in the initial details, who do you share it with?
Ideas are cheap. Many founders surround their schemes in secrecy, suspicious that their peers will try to beat them to the punch. Don’t sweat this. In fact, talk about your idea to anyone who’ll listen.
Sharing your concept is a great way to gain early feedback, gut-check, and better understand if your product is something people might actually use.
These conversations grow your network, connect you to other people working in your space, even potential investors.
Once you’re in-market, you should hope someone steals your idea — it’s validation that you’re onto something people want. Besides, even if someone steals your idea, they can’t steal your execution.
Brainstorm ideas. Your idea is your foundation. It informs all that you’ll do.
Try this exercise to creative juices flowing. Get clear about what really matters to you. Things you’re effortlessly, passionately interested in. Things you read about easily, and with enthusiasm. Make a list of those things.
Then, list the products and services that cater to those interests. Are there any areas for improvement? Any customer segments not being served? Any emerging technologies that might introduce new efficiencies? Any new use cases for existing products?
Write down your answers and review them for inspiration.
- How to get startup ideas | Paul Graham
- How to think like an entrepreneur: The inventure cycle | Steve Blank
- The idea maze | Chris Dixon
Part 6: Competitive Analysis
Here, we explain how to track, define, and evaluate competitors and how to use market research to your advantage as you build your business.
These are the steps you should take.
- Identify your competitors. A nuanced understanding of the competition is an essential ingredient of both your offensive and defensive business strategies — a perennial process that will help you better understand the market, track trends, and identify areas of opportunity throughout the lifecycle of your product.
- Just don’t get obsessed. Your goal is to learn from competitors, not copy them. Aim for maximum objectivity and intellectual honesty during your evaluation process, identifying the deficiencies in your competition’s approach with an eye toward solving real customer problems, and resisting the trap of undue influence.
- First, define competition. A competitor is any other product a user might reasonably choose in place of your own. This is a broad definition, so it helps to organize competitors into groups.
- Primary competitors. These are direct competitors offering a similar product and targeting a similar audience. Think McDonald’s and Burger King.
- Secondary competitors. These are competitors offering similar products, but targeting a different audience — possibly at a higher or lower price point. Think McDonald’s and Shake Shack.
- Tertiary competitors. All tangentially related business that could feasibly compete with yours, but not directly. Think McDonalds and the corner deli, or anywhere else someone might buy their lunch.
- Next, get organized. Create a spreadsheet to organize your list of competitors for quick comparison at a glance. Categories to compare will vary depending on your industry, but common ones include: Competitor category (primary, secondary, tertiary), product price, product pricing model, app store availability (iOS, Android), brand voice, etc. You can find a template in your Resources.
- Play the guinea pig. The best way to understand your competitors is to use their products directly. To the extent that it’s affordable, try as many as you can, paying close attention to your personal user experience — from customer service, to email follow-ups, packaging (for physical goods), and everything else.
Now, some additional tips to get going.
- Talk to people. Reach out to users of your competitors’ products and ask questions. What do they like about the products? What do they dislike? How brand loyal are they? Are they interested in trying something new?
- Google everything you can think of. Obvious, but you have to start somewhere. Next, set Google Alerts for relevant keywords (high-level terms, specific competitor brands, etc.), and stay up to date as news happens and new products come to market.
- Put social media algorithms to work for you. Create dummy profiles across social media platforms — tracking not only the brand accounts of your competitors, but also founders, key employees, and vendors of competing companies. A fresh account will help to eliminate the noise from your everyday feed, allowing social algorithms to focus on social suggestions relevant to your field of interest. It’s the best way to tap into the ground-level conversations among industry stakeholders in real time.
- Turn off your ad blocker. As you engage with social profiles and websites related to your industry, you’ll notice relevant ads being served to you. Take note of them. Pay attention to tone, brand voice, and design. How are competitors talking to users?
- Search the competition in the App Store and Google Play. Take note of suggested and advertised apps.
- Subscribe to subreddits. Reddit users tend to be on the frontlines of industry trends — follow the chatter there.
- Read the reviews. Take note of user complaints and product suggestions circling your competitors.
- Explore trade events and publications. Every industry has dedicated trades and conventions, but they can be costly. Look into them, but don’t feel obligated — you can find plenty by researching online.
- Use market intelligence tools. These can be expensive, too, but they’re worth exploring if you have the budget.
Research competitors. Use the techniques explained in this lesson to build your own competitive analysis spreadsheet. Identify at least five competing products and record the information that will help you understand them better: price, target audience, product features, and so on. You can find an example template in your Resources.
- How to conduct a competitive analysis for your business | Shopify
- How to start a competitive analysis: 57 questions you need to ask | HubSpot
Market intelligence tools
- Google Alerts – Never miss a mention of your competitors in the news.
- Crunchbase – Easily find information on fundraising, investments, acquisitions, executives, and more.
- Owler – Automatically identify competitors and aggregate intelligence.
- SimilarWeb – Track website data of your competitors and compare it against your own.
- App Annie – Uncover mobile app data, trends, and opportunities.
- BuzzSumo – Track your competitors’ content performance and social reach.
- Competitors App – Passively monitor your competitors’ marketing moves.
Part 7: What If You Can’t Code?
Until recently, the barrier to entry for product development was high: only trained engineers had the skills. Here, we look at how that’s changed, opening the door for a new wave of entrepreneurs.
Coding is optional
From Pandora to NerdWallet to Glossier, many of today’s most prominent startups were launched by non-technical founders.
Your non-technical toolbelt
Powerful new consumer software platforms have made it possible for people without coding skills to build polished, functional apps and websites without spending a lot of time or money. While no-code products probably aren’t a forever solution for your business, they’re a valuable, inexpensive option to quickly build and launch an MVP (see: Lesson 9 – Minimum viable product) into market without spending money to hire outside developers — allowing user-friendly development of everything from e-commerce storefronts to web apps to mobile apps to voice apps and more.
The no-code community
Having two jobs is a lot of work. You’ll have less free time for friends and family. Online maker communities dedicated to no code app building can connect you with other makers, whose valuable guidance can help inform the growth of your product.
Leave it to the professionals
If the DIY route isn’t a good fit, there are options. Depending on your company’s financial structure, freelancers and full-service agencies can be brought on board without sacrificing any potential equity. In circumstances that depend on someone with more skin in the game, consider a technical co-founder (see: Lesson 10 – Co-founders) — someone whose status as full-time as an equity partner can take your company to the next level.
Explore the world of no-code. Get familiar with platforms and communities for no-code product development. (They’re listed below.) If you lack technical skills and the budget to hire out, building your MVP using no-code is your best bet. Consider your planned product. Will you be able to ship an MVP using available no-code tools?
- The rise of “no-code” | Ryan Hoover
- How I built my startup Kollecto with no code: A story of a non-technical founder | Lean Startup Co.
- What no-code software really looks like | Forbes
Part 8: Lean Startup Method
The lean method is your startup playbook. Here, we explain how to apply it to your business.
Old-fashioned business plans no longer apply
The days of the 40-page business plan are done. The old ways of doing business were designed to perform in clear and predictable markets, but high-growth startups never go according to plan.
Look to the lean canvas
Founders should definitely have a plan. And as a rule of thumb, that plan should fit on a single sheet of paper. The lean canvas is a versatile business plan optimized for agile startups, designed to help you maintain focus, responsiveness, and versatility. Expect your canvas to change as frequently as once a week. You’ll find a template in your Resources.
Your lean canvas records the following:
- Problem. What are your customers’ pain points?
- Solution. How are you resolving them?
- Key metrics. Rely only on clear, objective performance indicators to validate (or invalidate) your hypotheses — these are the only numbers that reliably determine if your company is on track and your plan is working. Avoid cumulative numbers (total customers, total revenue, etc.), as these values can give the false impression that your business is thriving, even when things have taken a turn for the worse. Instead, look to metrics that are defined on a per-customer basis and are segmented in short, time-based groups.
- Unfair advantage. Declare what you possess that can’t be bought or copied. This could mean: insider information, domain expertise, access to customers, important endorsements, key partnerships, etc.
- Channels. Determine where your customers are, and how you’ll get your product in front of them. Are they on social media? Do they listen to podcasts? Do they respond to Instagram ads? What kind of people are they? How old? Where do they live? What kinds of media do they consume? Write these things down.
- Customer segments. Identify specific audiences you wish to serve. Customers may be segmented in many ways: need-state, behavior, location, age, gender, socioeconomic status, or any number of psychographic traits.
- Revenue streams. Clearly define how your company will make money in the short term. If you’re charging for your product, you should plan to make money from close to day one. If your long-term plan is to make money from advertising, immediate revenue will be less important — instead, your short term focus will be growing your audience.
- Cost structure. How much money do you need to get a bare bones minimum viable product in front of potential customers? Sometimes, getting the attention of even 50 people can require some cash, so it’s important to build this into your canvas.
Be willing to be wrong. Your goal is to learn what your customers truly want, and to develop products and services in response to direct feedback. To be effective, you have to be willing to be wrong. Wrong about your initial vision; wrong about your market assumptions; wrong about a lot of things.
Think like a scientist
In order to turn your wrong ideas into right ones, you’ll have to develop hypotheses about the real problems your customers face, and what the potential solutions might be. Be objective. Be flexible. This is what’s called validated learning.
To test your hypotheses, identify the clearest, simplest, and most elegant solution that you can. Then, ask yourself the following questions.
- How is my solution different and better than what’s already in the market?
- What would the press say about my product?
- What is my unfair advantage? Why am I the right person to start this company?
The lean method
In the ever-changing world of high-growth startups, flexibility is essential. Enter: the three-stage lean startup method.
- Problem-Solution fit. Ask yourself: are you working on a problem that’s really worth solving? Do your customers really want what you’re offering? Can you actually, technically build it? The goal of this stage is to answer all of these questions affirmatively. You’ve identified a real problem, and people are willing to give you money to solve it.
- Viability. Will people pay for your solution? Will they pay enough to sustain your business? How will you determine your offering price? For some companies, arriving at this kind of product-market fit can take years. The most important metric in this case is that you’re learning quickly, and applying the lessons.
- Growth. Once you’ve determined product-market fit, the next step is scale. How will you reach more customers? Where are your customers coming from? Pay attention to the data, identify what’s working, and double down. Optimize your internal personnel so team members have more freedom to focus on their strengths.
Build, measure, learn
The build, measure, learn feedback loop is designed to help you narrow and perfect your vision.
- Build. At the beginning of the loop, you’ve identified your problem-solution equation, and have set about building your solution: the minimum viable product.
- Measure. Introduce your minimum viable product to potential customers, and measure their qualitative and quantitative reactions.
- Learn. Spend the time to absorb the data that you’ve collected, and apply what you’ve learned.
- Repeat. With healthy businesses, the build, measure, learn feedback loop never really ends. Good companies are always innovating, paying careful attention to customers, and to data, and applying what you learn to stay ahead of the curve.
Get out of the building
When it comes to understanding customers, it’s best to get out of the office — there are no facts inside your building. Get out and talk to people face-to-face, build focus groups, and interact with online communities who might have an interest in your product.
Now that you’re talking, it’s time for some hard questions. Customer interviews come in two types.
- Problem interviews. The goal of the problem interview is to prove that your problem is a real problem. Talk to people, present your problem in an unbiased way, and measure the response. Is your problem their problem too?
- Solution interviews. At this stage, you’ve validated what seems to be a real problem in the market. Now, it’s time to return to the people experiencing those problems and ask them if the solution you’re proposing is a good one. Ideally, you’ll be talking to about 30 to 50 people, but the more the better, within reason.
Build your Lean Canvas. Using the information you learned in this lesson, practice building a Lean Canvas for your business. Set a timer for 25 minutes and fill in as much as you can. Working under pressure will force you to think quickly and creatively about your business. Use a whiteboard if you have access to one. Don’t worry if you can’t finish everything, it’s only practice. You’ll find a Lean Canvas template in your Resources.
- The Lean Startup | Eric Ries
- Why the lean startup changes everything | Harvard Business Review
- Eric Ries: The lean startup | Talks at Google
- How Superhuman built an engine to find product-market fit | First Round Review
- Beyond lean startups | Andreesen Horowitz
- Lean canvas examples of multi-billion dollar startups | Railsware
Lean startup tools
- CNVS – Build your lean canvas on the web.
- Typeform – Create beautiful surveys to capture customer feedback.
- Intercom – Personally communicate with your customers at scale through your site or app.
Part 9: MVP
Here, we take a look at building your MVP to start validating your business assumptions.
The MVP isn’t the polished final product. The minimum viable product can be a variety of things: a simple website, a hacked together service, a video presentation, a landing page, a crowdfunding campaign, etc. — anything that helps you start learning more about what your customers want that you can produce with minimum time, effort, and expense.
It’s not supposed to be perfect. The goal of the MVP is to build something that will allow you to test your key business assumptions and determine if your idea viable and people want what you’re selling. If you’re not at least a little bit embarrassed about showing it to people, then you don’t really have an MVP.
Trust the process. A well-thought MVP allows a company to learn a lot quickly, at minimal cost. It can be a company’s inflection point, or serve as evidence that things aren’t quite right. Use what you learn to refine your approach. Don’t get emotional about changing course or invalidating assumptions. Stay objective. .
Build, measure, learn. We covered this in the previous lesson, but it bears repeating. This three-step feedback loop is core to the process of discovering what customers want from you.
- Build. Here, you’re creating a minimum viable product based on the assumptions written on your lean canvas.
- Measure. Show your MVP to potential customers and quantify their reactions to either validate or invalidate your assumptions.
- Learn. Analyze the data, and decide whether or not it’s necessary to pivot.
After you’ve validated your hypotheses and started acquiring new customers, it’s time to transition from the MVP stage to official market launch.
It’s a normal step in the world of startups: a shift in strategy driven by the objectives of your original vision. To pivot successfully requires an honest and thorough assessment of everything you’ve learned about the market and product up to the pivoting point.
Growth is determined by three factors: the acquisition cost for new customers; the retention rate of current customers; and your product’s net promoter score, which measures customer loyalty by determining how satisfied users are with your product.
These aspects are influenced by a trio of different growth engines.
- The sticky engine. Your product is “sticky” when it’s hard for a customer to stop using it — when It becomes integrated into their lives or business.
- The viral engine. Your product is “viral” when its use extends to people beyond just your customer. Think: fashion. When someone wears a branded item of clothing, the brand is engaged by customers and non-customers alike.
- The paid engine. Your product has a “paid” engine when you have to spend money on advertising to acquire customers.
Units of measure
To measure the growth of your company in this early stage, look at the key metrics unique to your engine of growth; factors like customer retention, upgrades, or repeat purchases.
Actionable, accessible, auditable
Beware of vanity metrics — things like “total customers” or “total site visits” — as they may seem impressive at-a-glance, but don’t actually reflect performance. Instead, rely on metrics that connect specific actions to clear, measurable results.
Plan for your MVP. Determine what you’ll need to build your first minimum viable product. Can you create it yourself using no-code tools? Will you need to hire outside help to get it up and running? Is there a physical product you’ll need to produce? Write down your plan so you’ll be ready to hit the ground running.
- Perfection by subtraction – the minimum feature set | Steve Blank
- Why Build, Measure, Learn – isn’t just throwing things against the wall to see if they work – the minimal viable product | Steve Blank
- The ultimate guide to minimum viable product | Hacker Noon
- Net Promoter Score: an operational tool to measure customer satisfaction | Eric Ries
Lean startup tools
- Webflow – For responsive web apps.
- Bubble – For responsive web apps.
- AppSheet – For mobile apps.
- Thunkable – For mobile apps.
- Voiceflow – For voice apps.
- Shopify – For e-commerce storefronts.
- Carrd – For single-page websites.
- Substack – For paid email newsletters and podcasts.
Part 10: Co-Founders
“Co-founders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your co-founders is hard. And the success of a startup is almost always a function of its founders.” – Paul Graham, founder of Y Combinator
Do you need a co-founder? Let’s look at some of the pros and cons.
Pros: A good co-founder relationship means…
- added manpower to help build the business
- someone to commiserate with in the hard times
- complementary skill sets
- access to more people and more funding
- different perspectives and ideas
Cons: A bad co-founder relationship means…
- misaligned expectations
- ego clashes
Chemistry is important. When searching for the perfect co-founder, consider the following.
- Write a job description. Writing it out will force you to evaluate your own strengths and weaknesses, and think deliberately about what complementary skills your co-founder should possess.
- Start with your friends. Poke around within your personal network. Introductions from trusted peers are usually the most productive.
- Branch out. Attend local startup events. Reach out to university alumni groups. There are even matchmaking events and platforms designed to connect co-founders (buyer beware).
- Sell yourself. Any candidate worth their salt will be interviewing you just as much as you’re grilling them. It’s on you to communicate why you’re the right person to make this business work.
- Be honest. Once you have some prospects, spend time assessing compatibility. Are your business goals aligned? Do you share the same values? Can you forge a future with this person?
- Never settle. This is one of the most important relationships you’ll ever have, so waiting for “the one” is more than worth it. Be picky.
A cautionary note on co-founding with friends or family. Going into business together with someone you know in a different context can be tricky. Even when you think you know someone well, the stresses of startup life can make you see them in a whole new light. Friends and family start businesses together all the time with great success, but it doesn’t work out for everyone — and it can change relationships forever. Expect the best, prepare for the worst, and understand that you may risk losing the relationship.
OK, so you’ve nabbed the perfect co-founder. Now it’s time to formalize the relationship.
- To do this, you must draft a founders’ agreement that puts everything on the table as plainly as possible: job titles, asset ownership, remuneration, processes for decision making when there’s deadlock, and — most problematically — equity. You’ll find a sample founders’ agreement in your Resources.
- Because there’s not a lot of consensus on the subject of startup equity, it’s worth considering the different points of view.
- The 50/50 split. Some think all co-founders should split equity evenly: the same to win, the same to lose, the same skin in the game. WIth the 50/50 split, there’s no chance for resentment if scale is tilted in one party’s favor.
- The asymmetrical split. Parity isn’t always possible with complicated partnerships. Did one person invest more personal capital to get the business off the ground? Are they bringing IP or some other asset to the table that the other isn’t? Have they been working on the business alone for a long period of time? All sensible considerations.
- Due to the financial and emotional complexities of these decisions, enlisting the help of an experienced startup attorney at this stage might be a worthwhile investment. The key here is to be as open and honest as possible about equity from the very start — attempting to renegotiate terms after the fact is usually a recipe for disaster.
Write a job listing for your ideal co-founder. So now that you know what to think about when considering a co-founder, try writing a job description. Think about the things a co-founder would bring to the table that will complement you, and help to make a winning team. This exercise will help you reflect on the areas where you most need help.
- How to find a co-founder for your startup | Jason Calcanis
- Looking for love in all the wrong places | First Round Review
- How to pick a co-founder | Naval Ravikant
- How to find a co-founder | Guy Kawasaki
- Prenups for co-founders | Andreesen Horowitz
- How to allocate stock to founders and other early team members | Cooley GO
- How to split equity among co-founders | Michael Seibel
- The co-founder mythology | Mark Suster
- Don’t make founders’ equity even | TechCrunch
- Founder equity 101 | 500 Startups
- A better approach to co-founder equity splits | Northwestern University
- Common co-founder conflict: The founder who doesn’t scale | Techstars
Tools for meeting co-founders
- CoFoundersLab – A platform for founders to connect with potential co-founders.
Part 11: Going Full-Time
Can you really launch a successful startup if you already have a job? Let’s talk about it.
Sometimes conventional wisdom is wrong
Conventional wisdom says that in order to succeed, you should be fully devoted to your startup — no distractions. But startups are inherently volatile, especially at the beginning, and everyone’s personal situation is different. Going all in too soon can be a fatal miscalculation, while building on the side can serve as a hedge against instability and failure.
The cons of going pro
Assuming you already have a job, there are a lot of valid reasons to stay employed: the stability of a regular paycheck and benefits provide a safety net as you’re starting out. Plus, there’s data to back up this approach: studies have suggested that founders who kept their day jobs were 33% less likely to fail in their new venture than those who didn’t.
Incidentally, Steve Wozniak stayed at HP for a year after he created Apple Computer with Steve Jobs, Spanx founder Sara Blakely worked on her product for two years while selling fax machines full time, and Sergey Brin and Larry Page stayed at Stanford for two years after launching Google. You could be in worse company.
Doubling up has a downside
Having two jobs is a lot of work. You’ll have less free time for friends and family, and there’s considerable risk of burnout from working too much.
The work/work balance
If you’re going to manage a full-time job with a startup side hustle, here are some suggestions.
- Swear by your calendar. Block out regular time for your startup work. No distractions.
- Create a routine. Dedicate a space in your home for a home office. Pick a coffee shop with a good atmosphere. Give yourself a space and routine that you associate with work and productivity.
- Set small goals. Set big ones too, but setting smaller, achievable goals will help keep you motivated and feeling accomplished.
- Talk to a lawyer. If you’re bound by an employment contract, your employer may have a legal claim to any work you create. Make sure you’re free to pursue your startup while employed.
- Consider the optics. Even if you’re legally clear to pursue your startup, your employer may not love the idea that you’re working on something else. If this is a concern, beware telling coworkers about your side project.
Before going all in
- Build a runway. Save enough to survive without a salary for at least six months, preferably a year or longer. Living frugally while you save will help you build the skills to operate your business on a shoestring.
- Set honest goals. Establish milestones for your business. Go to market by X date. Acquire X number of customers by X date. Earn X amount in revenue by X date. This will keep you accountable regarding the health of the business as you move forward.
- Get mentally prepared. Working for yourself requires you to be self-directed and accountable yourself. Be sure you’re ready to thrive working in this new way.
Calculate your personal safety net. What can you do to plan for the eventuality of going full time with your startup? Create a budget to calculate your monthly living expenses: rent, food, cell phone bill, child care, etc. Then multiply it by 12. How much money will it take to give you one year of personal runway? Now add at least three months more to build in an emergency fund. This is the minimum you should have saved before even thinking about going all in on your business without outside investment.
- Should I Quit My Day Job?: A Hybrid Path to Entrepreneurship | Academy of Management
- Entrepreneurs, don’t give up your day jobs (yet) | WIRED
- How to build a startup while having a full-time job — according to people who did it | The Next Web
- The 10% Entrepreneur: Going part-time with your startup | University of Pennsylvania
- How I started my company while working full-time | TheStartup
Part 12: Brand
A strong brand will help you stand out and win fans. Here, we cover the basics of brand building for startups.
- Brand is more than just a name and a logo. Brand is the who, what, and why of your business.
- Stories make us feel. A compelling brand story will help people remember you, and even form emotional connections with your company.
- Brand identity is what separates similar products in the marketplace. Consider Apple. Their products call to mind simplicity, high-design, functionality, creativity. Now think of Dell. They make similar products to Apple — Good ones, too. But can you name one of them? Does the name Dell evoke any emotions at all? Probably not. (No offense, Dell! We still love you.)
- A brand is always evolving. It helps to set some ground rules so you’re communicating with your customers using a consistent voice. Write down your mission statement. Your values. List out the attributes that describe you. What are you? What are you not?
- You don’t need to spend a lot on brand. Conventional wisdom says that to build a great brand, you have to hire an expensive agency. Not true. And not realistic for most early-stage startups. You can do it yourself.
What’s in a name?
The wrong name can fail to leave an impression, cause confusion, or even invite legal consequences. Some questions to ask when choosing a name.
- Is it differentiating?
- Does it help tell your story?
- Is it elastic enough to grow with your business?
When you’ve selected the perfect name, next make sure that it’s not infringing on an already protected trademark. If you can, consult a lawyer here. Trademarks can be tricky.
Logo and identity
A professional identity is essential to establishing a trustworthy brand. You can spend a lot of money on a graphic designer to build out a complete identity, but for your initial MVP launch, simple branding should suffice — take the reins with any number of free or inexpensive tools online that allow you to design a polished brand by yourself, no graphic design skills required. You can always iterate in the future.
It’s one of the most important elements to consider when showcasing your business to the world. Presentation and design are paramount. As with logos, users may not always notice a good one, but they’ll definitely notice a bad one, and it will undermine their trust in your business from the start.
Some tips for establishing your web presence:
- Register a short domain for your business. You almost certainly won’t get the first .com address you want, but there are dozens of top level domains to choose from. Never settle for a platform-hosted domain (e.g. squarespace.com/yourcompany) — no one will take you seriously.
- Create an email address with your new domain. Use this for all business communication — no Gmail addresses. You’ll look like an amateur.
- Once again, keep it simple. Your website should include at minimum a description of your offering, contact information, a purchase/download link (if applicable), and a brief FAQ. There are a multitude of no-code design platforms that make it easy for anyone to build a beautiful website.
Social media essentials
Social media is an essential component of any holistic brand strategy. It’s where you communicate with your customers, test new ideas, and market your product at no cost.
- The brass tacks. First up, register your company across any social platform relevant to your business — Facebook, Instagram, Twitter, Reddit, Pinterest, etc. In a perfect world, your social handle will be consistent across all platforms, but it’s not always possible. That’s OK. Don’t bother chasing dormant or inactive accounts for the ideal handle, just do your best with what’s available. Almost everything can be changed later.
- Look busy. Before you launch, it’s important that your social profiles are populated with some content to project a sense of vibrance and identity. If you don’t have any visual assets to share yet, stock photography and social media design platforms can help you craft attractive content.
- Brand voice. Consider the tone of communication you’d like to represent your business. Are you funny? Dry? Cheeky? This brand voice will inform all of the avenues of consumer-facing communication. Social media can be a sandbox for experimentation and refinement of this voice, but always keep your audience in mind. Tweets are forever, so if you have to second guess it, don’t press send.
Define your brand values. Establishing a set of core values for your company will help you build stronger relationships with customers, communicate a clear vision to your team, and make better decisions. Make a long list of adjectives you wish customers might use to describe your company. Look for patterns or ideas that stick out. Expand on the most resonant concepts, and explain why they matter.
- The basics of branding for startups | Initialized Capital
- Startup branding: How much does it really cost? | TechCrunch
- This brand strategy can make your startup look bigger than it is | First Round Review
- 8 components of branding your startup | The Next Web
- Testing brand names: Why it’s important and how to avoid missing the mark | Lisa Bertelsen
Business naming tools
- Onym – A comprehensive resource for product naming centered on rich tools and deliberate methodologies.
- Naminum – A name generation tool for rapidly iterating ideas.
- OneLook Thesaurus – A powerful, user-friendly thesaurus that helps surface unexpected relationships between words.
- Trademark Electronic Search System (TESS) – Search live and dead trademark registrations on the United States Patent and Trademark Office website.
Logo design tools (for the design-challenged)
No-code website design tools
Domain registration tools
Social media management tools
- Namecheckr – Check domain and social media handle availability in with a single search.
- Burst by Shopify – Copyright-free stock photography for commercial use.
- Unsplash – Freely usable stock photography for websites and social media.
- Buffer – A leading resource for social media management, scheduling, and analytics.
- Canva – A simple graphic design platform for creating polished social media assets.
- Crowdfire – A powerful social media management tool for businesses.
- Landscape by Sprout Social – A simple image resizing tool for social media.
- SocialSizes – Image and video sizes and specs for all leading social media platforms.
- Planoly – A grid planner and scheduler for Instagram.
- Unfold – A tool for creating beautiful Instagram Stories.
Part 13: Marketing and Community
Here, we discuss how building meaningful relationships with early adopters can create powerful word-of-mouth marketing opportunities for budget-conscious startups.
Marketing and community are inextricable. The way you market something can help you build a community around your product — a community that can, in turn, do some of the marketing work for you.
Think of yourself as a party host. When it comes to community, it helps to imagine a founder’s role as a party emcee. Plan the kind of party you’d like to throw to best keep your guests comfortable and happy.
Communicate personally with your users. The people who reach out to you are your most passionate users, and cultivating those relationships can turn them into brand advocates.
Know your community. Study where and how your users talk to each other. This helps you better understand their culture so you can forecast what they want before they realize they want it. Investors recognize founders who deeply understand their community as assets.
Be real. Respect your customers. If you make a mistake, own it.
Invest in customer service. Users appreciate personal, high-touch customer service. Go above and beyond to make every customer service interaction a great one. It’s another way to differentiate from your competitors, build brand affinity, and engender loyalty, and encourage organic positive word-of-mouth marketing.
Organize offline. Community building is a great way of proving a product’s worth, regardless of where you are in the world.
Don’t press the press. In the early stages, media attention shouldn’t be a priority. If your product does what it’s supposed to do, press will come organically. If you’re dead set on chasing press, it’s best to speak to journalists directly — email or tweet them with information that might be of interest as it relates to your work and theirs. Become an asset. Help them help you.
Stay free. If possible, resist the urge to pay for marketing at the beginning, as organic growth will be a valuable way to evaluate your progress.
Know the PR landscape. While we generally advise a lean back approach to PR, you may eventually find yourself in a position where it makes sense to be proactive: a big product release, a major business milestone, or some other hook that would make a reporter’s job easy. Prepare for this moment by creating a spreadsheet of journalists, podcast hosts, influencers, and newsletter writers who cover your industry, including their contact information. When the time is right, outreach will be simple. At the very least, this exercise will give you a good list of reporters to follow on Twitter.
- The ultimate guide to startup marketing | Neil Patel
- 20 uncommon marketing strategies that’ll kickstart your startup | Neil Patel
- How startups die from their addiction to paid marketing | Andrew Chen
- Product marketing for new products | Andreesen Horowitz
- A crash course in minimum viable marketing | Lean Startup Co.
- How to build a community centered product | Lean Startup Co.
- How to build a Community that loves you | TheStartup
- Community and culture, online | Andreesen Horowitz
- Do things that don’t scale | Paul Graham
Startup marketing tools
- MailChimp – The industry-leading email marketing platform for businesses.
- Buffer – Social media management, automation, and analysis.
- Good Copy – Email marketing copy inspiration from top companies.
- Make My Persona by HubSpot – A playful customer persona generator.
Part 14: Incorporation and Legal
Navigating the legal world can be intimidating. Here, we demystify the process and explain why a good lawyer is a major value-add for your startup.
What’s a corporation?
Corporations are legal entities that are separate and distinct from their owners. Corporations enjoy most of the rights and responsibilities that an individual possesses — so many, in fact, that they’re known as “legal persons.”
Corporations can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.
If you’re not incorporated, you may be personally on the hook for any financial claims against your business. You may not need to incorporate right away, but if you want to bring on a partner, hire an employee, take on investors, or make any steps towards formalizing your business, you absolutely must incorporate to protect yourself.
There are services to help startup founders incorporate on their own, but If you’re able to, it’s advisable to work with a lawyer here. Incorporation documents are like the Constitution for your business, so making sure they’re squared away from the beginning is worth the investment.
A sample Delaware Certificate of Incorporation can be found in your Resources.
Lawyers are your friends
A startup attorney can lend you validation and credibility, grant access to a larger business network, help you anticipate thorny legal problems, offer insight into your market, mediate the equity division process with your co-founder, and much more. They’ll ensure that you and your company are protected so you can worry about what matters most: running the business.
Find a startup specialist
In almost any major city, you’ll find individual lawyers or firms that specialize in working with startups. They know about the particulars of startup administration, trademark, securities (buying and selling stock), and will already have relationships with potential investors and other founders.
Interview several attorneys to compare cost and feel out your personal chemistry. Hiring a lawyer means bringing someone into your inner circle, so it’s important that you get along and have mutual trust.
Note: legal prices and payment structures vary. You may pay a flat fee for certain services, maintain a monthly retainer, or even defer payment altogether until you raise money. Having several points of reference will help you make a more informed decision based on what’s right for your business.
Evaluate your legal needs. Review your business plan and write out the legal issues you will want to discuss with an attorney when the time comes. Are you limited by a current employment contract? Do you need to draft a founder’s agreement? Are you ready to incorporate? Do you need to trademark your business name? Next, research startup lawyers in your area and record them in a spreadsheet with their contact information. When you’re ready to engage an attorney, this research will come in handy.
- Where should you incorporate? | Cooley GO
- Why startups should Incorporate as a C-corporation | UpCounsel
- Post-incorporation checklist: 10 next steps to consider | Cooley GO
- 16 important legal requirements for starting a small business | Fundera
- How to get your money’s worth from your startup lawyer | TechCrunch
- Choosing a lawyer for your startup | Cooley GO
- Find the best lawyer for your startup with this off-the-record advice | First Round Review
- Stripe Atlas – A valuable toolkit for startup business formation from payment processing provider Stripe.
- Atrium – A technology-driven law firm specializing in startups.
- Clerky – A service for startup legal document preparation.
- UpCounsel – A marketplace that matches startups with local attorneys.
- Cooley GO – Online legal resources for startups from Peter Werner’s firm, Cooley LLP.
Part 15: Team and Culture
Here, we discuss the process of team building and the importance of fostering a positive company culture for long term success.
Hiring is your most important job
The greatest predictor of long term success is a strong team, and the importance of the first people you hire can’t be overstated. A good CEO is always in hiring mode. It’s your role to seek out and hire people who are smarter than you, and to help them buy into your vision.
The right time to grow your team
Are you turning down work because you lack bandwidth? Are balls getting dropped regularly? Are users complaining about poor customer service? Are you outsourcing a certain type of work frequently? The writing’s on the wall, my friend.
Hiring is about selling yourself
Competition for great candidates can be fierce, so you must be able to sell them on the potential of your company. Spend time on your job postings. Assume the reader has never heard of you before. Explain your mission, company values, and what makes you unique. Avoid corporate jargon. Appeal to emotions. Avoid passive voice. Use words like “you” and “we.” Make it aspirational.
Finding great candidates
Without name recognition or market authority, quality inbound applications will be rare. Look to your personal network. Reach out to valuable prospects you have your eye on. Consider hiring passionate users. Remember: great employees don’t just come from Ivy League universities or top tier companies. Get out of your comfort zone.
Look for soft skills
Hard skills matter, especially when hiring for technical roles, but they shouldn’t be your only evaluation metric. Startups are highly agile, often unstructured, with job roles that can change in an instant. Consider candidates whose personality, intelligence, diligence, curiosity, ambition, and adaptability would best suit the ambiguity of startup life. Look for a demonstrated record of high achievement, in work, school, or even athletics.
Culture fit vs. culture add
While it makes sense to hire team members who you think will be able to easily adapt to the core values, attitudes, and behaviors of your team, it’s important to beware the pitfalls of overemphasizing this kind of “culture fit.” Unconscious bias can lead to cultural homogeneity. Instead, follow the precept of “culture add.”: Aim to hire individuals that will not only get along with the team, but also enliven it with new ideas and points of view.
The data on diversity
Corporate diversity is directly linked to profitability. According to a 2015 study by Mckinsey & Company, companies that are in the top quartile for diversity have a better chance of receiving above average financial returns than companies that lack diversity. Bloomberg conducted an analysis of 20,000 venture-backed startups and found that successful tech startups have twice as many women in senior positions as unsuccessful startups.
Simply put: teams built on broader, more varied backgrounds are better equipped to deal with the twists and turns of startup life. Make inclusion a priority.
The practicalities of full-time vs. freelance
What to consider when deciding between freelancers and full-time employees.
- For full-time employees, employers must withhold payroll taxes such as income taxes, Medicare and Social Security. Freelancer require different tax forms, are responsible for withholding their own taxes, and generally don’t receive benefits.
- Full-time employees tend to be more highly engaged and committed, meaning higher productivity and less potential for turnover.
- Freelancers tend to stay within the narrow parameters of their role. They’re inherently less committed to the company, meaning they will be more likely to jump ship, especially if they’re offered a full-time role. For reference, a sample independent contractor agreement can be found in your Resources.
- Freelancers can only work 1,040 hours (roughly 4 months) for any one employer each year. If you find a freelancer indispensable to your operations, consider offering them full-time or contract-to-hire employment.
- It’s standard practice to have any new hire sign a non-disclosure agreement. An NDA is a simple contract designed to protect your trade secrets, intellectual property, and other sensitive business information. You can find an example in your Resources.
The pros and cons of remote teams
Remote (or distributed) teams are becoming increasingly common, with workplace flexibility having grown by as much as 40% in the last 5 years.
- A deeper pool of talent regardless of geography
- Potential savings per employee when a physical location is not part of a company’s budget
- Remote work may invite more distraction, hindering productivity
- Building a culture at your company will be more difficult in a remote setting, meaning founders will have to go the extra mile to keep employees motivated, aligned, and excited about the company’s mission
- Offices are designed to create an environment to maximize work efficiency. This is lost in remote settings.
The bottom line
Hiring remote workers means placing higher emphasis on independent self-starters who require less guidance and oversight on a day-to-day basis. As a manager, you must set concrete goals at short intervals to keep remote employees accountable. Regular IRL meetups are recommended when possible. Regularly scheduled, non-work hangtime “coffee meetings” by video conference can be a good substitute.
Write a persuasive recruiting blurb. To attract the best candidates, you must sell them on why your company is awesome. Practice your pitch by drafting a short paragraph about your company for an audience of prospective employees. Think about what an ambitious applicant might want to know. Who are you? What are your values? What complex problems are you solving? For inspiration, reference job listings from companies you admire.
- How to hire | Sam Altman
- Hiring, the Single Most Important Skill as a Founder | Techstars
- The right kind of ambition | Ben Horowitz
- Finding and hiring for (expectations) fit, on both sides | Andreesen Horowitz
- How to hire your first 10 employees | AngelList Blog
- Make non-obvious hires | Sequoia Capital
- What is employer branding and how can it grow your business? | LinkedIn
- Understanding employer branding | Built In
Full-time vs. freelance
- What’s the difference between an independent contractor vs. an employee? | Gusto
- The Employer’s Guide to Independent Contractors Vs. Employees | Zenefits
- Hiring contract vs. full-time workers: What’s more cost effective | Fundera
- How to effectively manage a remote team | TheStartup
- Remote teams can have great culture. These 6 strategies will make it happen | Inc.
- My 400-person company has a great work culture, and we all work remotely | Fast Company
- The problems in remote working | Ryan Hoover
- Remote: Office Not Required | Jason Fried and David Heinemeier Hansson
- Why diversity matters | McKinsey and Company
- Diversity and inclusion in technology | Techstars
- Here’s how to improve diversity in startups | World Economic Forum
- Don’t let your startup get caught up in “diversity debt” | Village Capital
- 3 reasons you should stop hiring for “culture fit” | Fast Company
- Diversity is an innovation strategy | Forbes
Hiring and team management tools
- Gusto – Benefits and payroll management for startups.
- Zenefits – Another benefits and payroll management platform for startups.
- Carta – Cap table management for startups.
- AngelList – A hub for startup employers and job seekers.
- ZipRecruiter – A top recruiting platform that uses AI to automate and streamline the talent recruitment process.
- LinkedIn Talent Solutions – LinkedIn’s hiring platform.
- Nomad List – A hiring platform for remote workers and employers.
Productivity tools for teams
- G Suite – Google’s suite of office and productivity products, including collaborative word processing, spreadsheets, presentations, and more.
- Slack – The leading chat and communications platform for teams.
- Zoom – Best-in-class video chat.
- World Time Buddy – A time zone tracker for distributed teams.
Part 16: Fundraising and Venture Capital
What you’ve been waiting for. Let’s talk about money.
The basics of fundraising
Software, equipment, rent, employees — they don’t come free. While it’s possible to get a product off the ground cheaply, at some point you’ll need to spend real money to grow. That’s where outside investors come in: friends or family, business angels, or professional venture investors (aka VCs).
As a general rule, 25% of startups will receive investment from friends and family, 2.5% will receive angel investment, .25% will receive early stage venture investment, and .025% will receive later stage venture investment. Reality check: the number of companies that make it all the way through this sequence is small — the majority of businesses will begin and end in the first stage.
How funding rounds work
The dream: bootstrapping your business, getting traction, attracting incoming investor interest, then closing the deal. Another reality check: it’s almost never this easy.
More likely, your first contact with professional investors will take place when you commence an official funding round.
If you’re lucky enough to find a single investor willing to invest the full amount you’re looking to raise, you sign the paperwork, they wire the money, and the round closes. More likely, an investor will commit some, but not all, of the funds you’re hoping to raise and the round continues with that party as the lead investor. Then, you find more investors to close out the round.
Once the initial term sheet is negotiated and agreed upon between you and your lead investor, all other investors will be invited to join the round under the same terms. Usually, term sheets require that a minimum amount is raised in order to trigger the investment — meaning that if no additional investors join the round and the minimum threshold isn’t met, all committed investors are free to walk away.
What to look for in a lead investor
- A commitment to invest 25-50% of the full round
- Domain expertise in your market
- Connections in the startup world and a network of other investors
- Commitment to you and your mission
What investors evaluate
- Your team. Founders are key to the success of any venture. Investors will assess your experience and domain expertise. Prior experience or demonstrated success as an entrepreneur goes a long way, but isn’t necessary — many companies are funded by teams with no prior entrepreneurial or leadership experience. Investors will also look for complementary skill sets among the founding team.
- The opportunity. Investors consider the market size of your product and the performance of competitors. The strength of competition will be closely evaluated. Does one company control the entire market? Is there a reason no other competitors exist?
- The product. Investors prefer “painkillers” that solve problems over “vitamins” — better/faster/cheaper versions of existing solutions. Barriers to entry is also important. How easy would it be for an Amazon or Google to knock off your product? How likely is that to happen?
- The sales channels. How are you selling, marketing, and promoting your product?
- The pitch. Cohesive, concise, persuasive pitches way are music to investors’ ears.
Incubators and accelerators
An incubator is a company that helps startups grow by providing assistance with grants, investment, mentorship, networking opportunities, office space, and more. In exchange for this support, they take a small equity stake in your company (anywhere between 5% and 25%).
Accelerators are like bootcamp for startups. They’re highly structured, with a condensed incubation period in which entrepreneurs determine the viability of their products. They usually culminate in a demo day, where founders pitch their companies to an assembled group of investors.
The VC landscape
There are more entrepreneurs than investors. Only about one company out of 400 seeking venture funding actually receives it.
A typical VC may see 500 opportunities cross their desk every year. For top investors, that number could reach 2000. For this reason, investors tend to vet opportunities based on trusted referrals.
Connecting with investors
In the world of startups, opportunities can come from pretty much anywhere, but here are some starting points.
- Your network. Once you’ve identified investors fit for your business, look for connections within your own personal and professional networks. A warm introduction from a mutual friend or acquaintance is always the best way in.
- Angel groups. Angel investors are individuals or groups that put their money into early-stage startups. Most founders meet angels through their personal network, but some connect through established angel networks, either local or online.
- Pitch competitions. Pitch competitions are events where founders make presentations to an audience of potential investors. These are put on by angel groups, schools, economic development organizations, or private companies. Carefully research any event asking you to pay a big sum for access. Unfortunately, there are some sketchy groups out there.
The pitch deck is the most important of all the materials you will present to prospective investors. You’ll find a template for the industry standard format in your Resources, but the following are the slides to include.
- Company purpose. Define the company in a single declarative sentence.
- Problem. Explain the problem you’ree solving for customers, including how they are presently addressing that problem.
- Solution. Explain how your product makes the customer’s life better.
- Why now? Explain the history of your category while defining recent trends that make your solution possible.
- Market size. Profile your customer base and calculate the total available market (TAM), serviceable available market (SAM), and serviceable obtainable market (SOM).
- Competition. List competitors and define your competitive advantage.
- Product. Describe your product lineup.
- Business model. Detail your revenue, sales, and distribution models.
- Team. Include bios on the founding team and any advisors.
- Financials. Outline your P&L, balance sheet, cash flow, cap table, and the deal.
Ownership can break down in a few different ways. Here’s a quick summary.
- Common stock. Common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure; in the event of liquidation, common shareholders have rights to a company’s assets only after bondholders, preferred shareholders and other debt holders are paid in full. Common stock ownership is preferable when a company is a big success, because owners share in the upside.
- Preferred stock. Preferred stock is a class of ownership in a corporation that has a higher claim on assets and earnings over common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights. Preferred stock is preferable when a company is sold at a loss, because owners have the chance to get their money back before the founders see a penny.
- Convertible preferred stock. Convertible preferred stock is preferred stock that includes an option for the holder to convert preferred shares into a fixed number of common shares — usually after a predetermined date. This is what most startup investors buy. The value of convertible preferred stock is ultimately based on the performance of the common stock. Simply put, this stock type can be converted to common stock in a favorable scenario, allowing its owners to have their cake and eat it too. In an unfavorable scenario, the first money that comes in pays off investors’ money. Anything left over goes to common stock owners.
Selling stock is only one way to raise money — you can also borrow money to get your company off the ground. Borrowing money results in a fixed payback to the investor, regardless of outcome — their return is guaranteed. This type of debt has relatively low returns in the high-growth startup world, meaning many investors will opt instead to finance via convertible notes. Convertible notes are a hybrid investment model that allows creditors to convert a successful company’s debt into stock — usually at a discount of 10-30% at the time of their purchase (with a cap on the amount of discounted shares they can purchase). An example convertible note can be found in your Resources.
When investors want in on your company, they’ll present you with a term sheet summarizing the major deal points.
It’s not uncommon for founders to shop term sheets to other investors — the validation of one suitor’s interest can rally others previously on the fence. Because of this, investors typically enforce as short a consideration time as possible on term sheets.
Once a sheet is signed, it’s both legally and ethically binding. If one party backs out without good reason, there will be legal and reputational repercussions.
To see what a term sheet looks like, go to your Resources.
Depositing funds into an escrow account is often required during a large funding round involving several investors. This protects investors if a company is unable to raise the full round, and guarantees to founders that the money is real.
Before you get the money, investors perform diligence on you and your company.
- Market diligence. A review of the market size, competitors, and business opportunity.
- Business diligence. A review of the claims you make on behalf of your company, including: customers, revenues, expenses, as well as a review of your personal and professional background.
- Legal diligence. A review of all legal documents, including IP ownership documentation, employment contracts, vendor agreements, and more.
A capitalization table is a spreadsheet or table that shows the equity capitalization of your company. In other words, it shows you who owns how much and what the market value of the company is. It’s a fundamental resource for the business and is used for everything from fundraising to hiring, so it should always be kept current. You can find an example in your Resources.
Research potential investors. Build a spreadsheet listing companies in your sector alongside their investors. This exercise will help you better understand which investors might be interested in your business.
- A fundraising survival guide | Paul Graham
- How to raise money | Paul Graham
- A guide to seed fundraising | Y Combinator
- How to raise money from a venture investor | Andreesen Horowitz
- Fundraising advice to avoid | Andreesen Horowitz
- The fundraising wisdom that helped our founders raise $18B in follow-on capital | First Round Review
- What’s the first thing you need to do before fundraising? | Mark Suster
- The beginner’s guide to VC | Mattermark
- VC: An American History | Tom Nicholas
- Secrets of Sand Hill Road | Scott Kupor
- How to understand and choose a venture investor | Andreesen Horowitz
- The a16z Pitch Room: Sandbox VR | Andreesen Horowitz
- How to present to investors | Sequoia Capital
- How to structure a pitch deck for investors | TheStartup
- What should you send a VC before your meeting? | Mark Suster
- A standard and clean Series A term shee | Y Combinator
- The economics of term sheets | Andreesen Horowitz
- Term sheet negotiation: How to avoid common mistakes | Atrium
- Negotiating term sheets: Focus on what’s important | Cooley GO
- How startup options (and ownership) works | Andreesen Horowitz
- Gust – A platform connecting founders and investors
- AngelList – A hub for startup founders, investors, and job seekers.
- Investor Hunt – A database of tens of thousands of startup investors.
- Kickstarter – A leading crowdfunding platform.
- Indiegogo – Another leading crowdfunding platform.
- SeedInvest – A crowdfunding platform focused on startups.
- Carta – Cap table management platform for startups.
Pitch deck tools
- Sequoia Capital (Pitch Deck Template) – The industry-standard template for startup pitch decks.
- DocSend – Track who has and hasn’t opened an emailed presentation, make dynamic edits, and manage access.
- Startup Pitch Decks – A curated collection of fundraising decks from the world’s most successful companies.
- Y Combinator – Silicon Valley’s top-ranked startup accelerator.
- Techstars – Another highly competitive and prestigious accelerator.
- 500 Startups – An early-stage venture fund and seed accelerator.
Part 17: Self-Care
The pressure’s on. With the fate of a whole company fixed firmly on your shoulders, self-care is no longer just some buzzy, metaphysical abstraction — it’s a necessity.
Taking care of yourself doesn’t require extreme measures — nothing against Transcendental Meditation®, Bikram Yoga®, or Burning Man, but there are plenty of everyday ways to deal with the natural stress of being a founder.
- Strive for a better work/life balance. A rich, well-rounded experience outside of the office helps promote more resilient leadership, while fending off psychic burnout. Make time for friends, family, and yourself.
- Talk. Uncertainty is normal. Sometimes the most important things are the hardest to say out loud. Express your self-doubt and concerns — just getting these feelings off your chest can be therapeutic. If therapy is an affordable option for you, consider it. Otherwise, confide in the people you trust most: A parent. A sibling. A mentor.
- Exercise. It’s good for your physical and mental health, and it gives you time to reflect. Sometimes the best ideas come during a good workout.
- Don’t fall into the “hustle porn” trap. Silicon Valley runs on the playact of professional excellence — with social media performances that fetishize marathon nights, 70-hour work weeks, and glossy, unrealistic, and exclusionary expectations of what it means to be a founder. It’s a lie.
- Unplug. Create time away from screens. Seriously. Put your phone down.
- Set small goals. Modest achievements will help you stay motivated and keep your head in the game. Checking items off the to-do list is addictive.
- Give back. When you’re in the position to do so, give back to your community. Volunteer. Be a mentor. Get out of yourself.
Reset your routine. Make time in your morning (even 15 minutes will do) to self-reflect and prepare for the day with intention. Work on creating a new habit that makes you feel good. Meditate. Exercise. Write down your thoughts. Cook breakfast. Whatever you do, leave your phone behind. If you have kids, a partner, or some other obligation that may complicate your morning, try waking up earlier than normal — or make time at the end of your day. Challenge yourself to do this for 10 consecutive weekdays, reflect on your new routine, and evaluate its effect on your well-being.
- Reddit co-founder Alexis Ohanian is taking a stand against “hustle porn” | Quartz
- Tech’s obsession with “hustle porn” is discriminatory and counterproductive | The Next Web
- Work-life. Balance. | Initialized Capital
- How to manage stress in a startup | Andreesen Horowitz
- The Joy of Leadership | Tal Ben-Shahar
- Calm – Learn to meditate, relax, sleep better, and more.
- Headspace – Get in touch with your inner-self via guided meditations.
- Fabulous – Build healthy routines with this award-winning app.
- Nature – Go outside. Literally.
Party 18: The Road Ahead, Resources
This is just a few minutes of encouragement from Alexis. Here are some of the free resources that they included that you might want to review:
Get the full juice over at Knowable!