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Here are 10 quality posts from the Founder's Library:

Only work on single-miracle startups  

Elad Gil:

If your startup needs multiple miracles to succeed, you need to go back to the drawing board and come up with an idea or product that has only one miracle. Otherwise you are multiplying out multiple low probability events and are extremely likely to fail.

Many people delude themselves on whether they are a one-miracle, or multi-miracle startup. They way to tell is to ask yourself what your product or business end goal is. Is your approach directly focused on achieving that end goal? If not, you may have a multi-miracle plan without realizing it.

Yep. Although I disagree with Elad's assertion that:

If your startup needs zero miracles to work, it probably isn't a defensible startup.

That is true only in a winner-takes-all market. Some markets are naturally fragmented. You don't need a miracle to build a successful web development company, you just need competence, hard work, skill, luck, good business relationships, and a dozen other tricky but achievable ingredients. And, depending on your definition, those can be startups too.

Frighteningly ambitious startup ideas  

Paul Graham nails another top notch post. The series of ideas, ranging from new search engines and email replacement to medical monitoring devices and "the next Steve Jobs", are all frighteningly difficult to pull off. One might even argue that they are the kind of ideas where being unaware of your long-term goal is actually an advantage - otherwise, you'd have to be utterly insane to pursue them.

The real value of this post to almost everyone who will read it is not in the ideas, imho, but in the introduction:

One of the more surprising things I've noticed while working on Y Combinator is how frightening the most ambitious startup ideas are. In this essay I'm going to demonstrate this phenomenon by describing some. Any one of them could make you a billionaire. That might sound like an attractive prospect, and yet when I describe these ideas you may notice you find yourself shrinking away from them.

Don't worry, it's not a sign of weakness. Arguably it's a sign of sanity. The biggest startup ideas are terrifying. And not just because they'd be a lot of work. The biggest ideas seem to threaten your identity: you wonder if you'd have enough ambition to carry them through.

There's a scene in Being John Malkovich where the nerdy hero encounters a very attractive, sophisticated woman. She says to him: Here's the thing: If you ever got me, you wouldn't have a clue what to do with me.

That's what these ideas say to us.

This phenomenon is one of the most important things you can understand about startups. You'd expect big startup ideas to be attractive, but actually they tend to repel you. And that has a bunch of consequences. It means these ideas are invisible to most people who try to think of startup ideas, because their subconscious filters them out. Even the most ambitious people are probably best off approaching them obliquely.

Frighteningly ambitious startup ideas are frightening for a reason. Some (particularly those who aren't chasing those ideas themselves, but instead just investing in others who are) might feel that it's a good thing for a founder to be frighteningly ambitious, but for the vast majority of founders, that simply condemns them to failure. That's why they're afraid: because they have some common sense.

Of course, it all depends on what you're trying to achieve. If you want comfort or wealth, those hyper-ambitious ideas will practically guarantee that you never get there unless you basically win the lottery.

On the other hand, if you are an insane, driven, megalomaniac control freak like Steve Jobs or Bill Gates, a modern-day Genghis Khan or Alexander who wants to rule the world by the methods of today rather than bloody battlefields, you don't care about achieving comfort, and you probably won't care for this blog post either.

Go for it, don't let me stop you (I couldn't anyway). For the rest of us, though, a focus on less frightening ideas might allow us to make enough money to purchase those world-changing devices that the next Steve Jobs will build, instead of being broke all the time.

Max Levchin's hiring tips  

Max Levchin's hiring tricks, put together by Bill Trenchard:

  • If there's a doubt, don't hire them
  • Hire people you know already
  • Stay away from diversity early on (controversial!)
  • Differentiate your company through its hiring process

The article is interesting. Sadly, I don't think it will help. Call me a cynic, but I think hiring is one of those things where people listen to the advice but then do their own thing anyway. Then they learn.

An interesting point from the article:

It’s easy to think you can’t possibly know enough good people from your network to build out an entire team. While in some ways that’s true, Levchin’s experience is that almost everyone actually knows more good people than they believe they know. The challenge is that most founders rule out top talent because they think they’ll never be able to actually get them to join their team.

Levchin learned early on not to make this mistake. When PayPal was founded, he sat down and created a list of potential engineering hires. When he was done he had a single name written down. Levchin recounts demoralizing exercise, “ Peter [Thiel] sat me down and he made me write down every smart person I knew in college personally. Turned out to be a list of about 30 people and we ended up hiring about 24 of those.” You can’t rule potential hires out just because you don’t think you can win them. He went on to note, “We had this cascading effect where our team would be forced to write down everybody smart they knew that they were absolutely confident they could never hire. We then went after them like banshees and they would eventually crack."

Enjoy the read.

Business plans? I've heard of them  

Dan Shapiro asks the question and also provides an answer:

... what to do when an investor requests that you conjure an obsolete 30-page document from the ether and send it to them that evening [?]

(...)

Whenever an investor asks you for your business plan, send them the same damn packet you send to everyone else. In our case, that was a 3-page “executive summary” and a dozen slides giving an overview of the business with some screenshots of the product (it was mobile, and 2006, so there wasn’t any easy way to send them a demo). Don’t apologize and don’t mention the business plan.

Sound advice in the tech startup context, but I'd like to dig a little further into it.

Business plans are outmoded, right?

Business plans are universally reviled among tech startups, both on the entrepreneur side and among investors. And that's fine. Most tech startups operate under conditions of extreme uncertainty, and large swathes of a standard business plan become utterly irrelevant in those conditions. Five year financial projections? You gotta be kidding. Even providing a high-level plan of what features will be built can be misleading. "We'll build what the users tell us they want through A/B testing their wallets" is a better answer for that section.

That said, as Dwight D Eisenhower (and no doubt many others) put it:

Plans are worthless, but planning is everything.

There is, of course, the romantic notion that a couple of hackers with a dream, a garage coffee shop, and a couple of old computers high-end macbook pros (this is the 2011 version of the dream) will just build, build, build, and out will pop a magical startup success. And it does happen sometimes, in very specific circumstances where the stars were aligned just right (I'm looking at you, Github).

But most of the time, those startups fall flat on their face. If all you do is build it, they won't come - 99% of the time at least.

So, what does "planning" mean in the context of a startup?

Context is everything

The answer, of course, depends on what type of startup you're building. Here are some examples of things that even a scrappy startup should think about, even if no concrete decisions are made:

  • Is there competition? What's the competition like? What will we do better? What will we do worse? Which features will we focus on? (basic competitive analysis)
  • Is there demand for this feature set? If we're building a B2B startup, can we get potential customers to show enthusiasm and even sign non-binding letters of intent before we get started working? In a B2C context, can we get people excited about it? In other words, does the idea pass basic validation tests? (basic customer validation)
  • What are the minimum features we're going to build before we get our first set of users on-board? (basic planning)
  • Is this a growing market? Will the rising tide float our boat or will we have to fight for survival in a shrinking market? (basic market research)
  • Do we have the skills in-house to build all this? Will we need to budget for external work for part of the product? Should we do it in-house (slower, but better) or outside (quicker but more expensive and probably lower quality)? (basic planning)
  • When do we run out of cash? By when do we need to show traction so that we can go out and spend 6 months raising the next round of funding? (basic financial forecasting)
  • What's our route to market? How will we reach users concretely (note: "viral" is not an answer to this)? (basic marketing)
  • What's the vision driving us? Why are we in this, other than making a bit of money? Is this is worth 3 years of our lives even if we fail? (basic mission statement)

And so on.

None of those need to be answered to a great level of detail. But if you haven't given any thought to any of these, you are not ready to start your business. Of course, you may start it anyway, and you may even succeed, but smart founders try to stack the chances for themselves, not against themselves.

So, about that business plan...

Going back to the original question, one thing that's implicit in Dan's answer is that they did answer all those questions before they went pitching. Nobody ever said that a "business plan" has to be a boring 20-page document. It can be a boring presentation too! (or even a fun one, if you actually want funding)

When an investor asks for a "business plan", really they're asking for some kind of "emailable thing" that they can look at afterwards to help make up their mind about whether to invest. No intelligent investor is going to say "sorry, I can't invest, because your business plan is a PDF of a presentation, instead of a word document."

And you should have some kind of executive summary or slide deck that you can pass around to leave people with something they can look at. And Dan Shapiro did have that. So, although their business plan didn't fit the template from 40 years ago, they did have a business plan. And they sent it to investors who requested it, and got their funding.

Business plans aren't obsolete anymore than letters are. They've just evolved to match the times. Letters have become emails, and business plans have become executive summaries and pitch decks. If you want to raise money, you still need a business plan - the 2011 version.

Gamification Wiki  

Despite the funny name, excellent collection of ideas for adding game mechanics to a web application. A friend of mine succeeded in doing just that after reading this cracked.com article, but this website is far more complete. Particularly the Game Mechanics section, which lists no less than 33 mechanisms by which to make an application more game-like.

My favourite:

Loss Aversion

The act of inducing player behavior not by giving a reward, but by not instituting a punishment. Produces consistent level of activity, timed around the schedule.

Almost all startup products can benefit from these. This site is a gold mine.

Progressive signup  

The folks at QuietWrite propose a better way to do sign-up forms: don't.

Basically, we eschew the typical signup wall for a more gradual process over a longer period of time. As the user plays with our product, we gently prod them at certain checkpoints to give us more info. This results in a better and more natural user experience.

Of course, this is nothing new, and Posterous has been a, dare I say it, poster-child of this no-signup or low-touch-signup movement. Every application benefits from allowing the user to stick themselves in as far as possible before being asked to fill in a details form.

This must be carefully balanced against your business's needs, however. Perhaps your business depends on leads capture to such an extent that it needs to capture emails immediately or lose the customer forever. In my experience, those aren't the most thrilling of businesses, but still, this is another decision that you should make deliberately, not by default.

How to increase user engagement  

Des Traynor runs one of the best blogs on User Experience around. If you're not subscribed, I highly recommend you do. He's consistently pushed out excellent, thoughtful, instructive, beautifully illustrated, useful articles about various aspects of designing a startup's product as well as the hidden bits like analysing user behaviour.

This particular article focuses on how to increase user engagement, and suggests several specific techniques:

  1. Make a strong impression
  2. Always show a welcome message (presented in such a way as to start a discussion)
  3. Gradually expose the depth of your product
  4. Define a message schedule
  5. Announce features and improvements in-app
  6. Talk with customers during trials

Great stuff. Read it.

How to fire an executive  

Here's a very informative article by Ben Horowitz, about how to go about the complicated and painful task of firing an executive. Some key points:

While it’s possible to fire an executive for bad behavior, incompetence or laziness, those cases are rare and relatively easy. Unfortunately, unless you have a horrible hiring process, those are probably not the reasons why you got to this point. At this level, almost every company screens for the proper skill set, motivation, and track record. Yes, the reason that you have to fire your head of marketing is not because they suck; it’s because you suck.

(...)

But keep in mind that your choices are: a) alarm the board or b) enable an ineffective executive to remain in her position. While choice (a) is not great, it’s a heck of a lot better than choice (b). Leaving a failing leader in place will cause an entire department in your company to slowly rot. Let that happen and the board will be more than alarmed.

Worth reading the whole article carefully, and hoping that you won't need the information inside too often.

Perspective on the billion-dollar exit  

Adam Siegel:

Instagram sells for $1B. Evernote is now valued at $1B. Pinterest at $1.5B. 3 month old companies coming out of YCombinator are getting investments based on $10M+ valuations. And today will be the Facebook IPO which will likely put a market cap on the company north of $100B.

(...)

As the founder of a small company in Chicago who only took $17k from YCombinator 6 years ago (YC-W06) and now runs a classic “lifestyle” business that support myself and a small team from client revenues, I find myself wavering between being fairly satisfied with the state of my business life to mild depression and jealousy that I’m not in a situation to be cashing in myself.

Adam goes on to offer numerous tips for maintaining perspective while working on a "lifestyle business":

  • Spend time with friends who are not in tech or startups
  • Read the newspaper
  • Go for a lot of walks
  • Go visit some of your customers in person
  • Maintain a healthy relationship with parents
  • Keep a journal (not a blog)
  • Find a therapist, life coach or mentor
  • Appreciate your time more

Those seem like good things to do whether or not you run a billion-dollar startup.

However, addressing the point of billion-dollar-depression head on, it seems to me that the problem is more to do with a fundamentally incorrect perspective than with specific daily habits.

Generally, people looking to build those mega wealth successes are either insanely obsessed with money/control/power/etc (I'm not addressing this post to them), or just wish to have a great impact on the world - to make a dent in the universe, in other words.

It's a commonly repeated fact that the difference to your lifestyle from having $10m (or revenues that provide an equivalent lifestyle, e.g. $500k-1m/year of revenues) versus having $100m is much smaller than the difference between $0 and $10m. There's a very strong law of diminishing returns in application to the value of money. So as far as money goes, having a "lifestyle business" that provides you great but not headline-grabbing returns seems like a perfectly fine deal.

The depression can then only come from the lack of impact. It seems perfectly reasonable to me that people should wish to have a great impact on the world, to make a lot of people's lives better, to be a force for good and improvement and progress. So far, so good (though not everyone feels like that - some people are happy to simply enjoy their lives and be good people).

It's well-known that luck plays a huge part in mega-successes like Facebook, Instagram, and so on. There's a good reason why this merry game is called the "startup lottery". The chances that you will pull a billion-dollar business from the magic hat are very slim. Obviously, if you do, great - but you can never count on such an outcome.

The fallacy in that depression is the implicit assumption that your current business is the only or greatest thing you'll ever do with your life. This may be true for someone like Mark Zuckerberg. Topping Facebook is going to be a struggle. To an extent, it's Mark who should be depressed. How will he top what he's already achieved? How can he give his life a meaningful direction upwards?

For most of us, though, we have not only the current business we're working on, but the rest of our lives (short or long) to make an impact and change the world. That your current business will not change the world doesn't mean that your next one won't. If you want to change the world, you are even more likely to be able to do so from a base of wealth and competence (after running a successful business for a few years and becoming a millionaire in the process) than when you're broke and fresh out of uni.

Keep in mind that changing the world takes time, and that you don't have to hit the ball out of the park first time. Changing the world in your twenties is a lottery ticket, not a plan. Viewed through this lens, the "billion-dollar depression" seems, well, absurd.

Corporations and companies are a responsibility  

Hamza Siddiqui:

My dilemma started when my co-founder and I had to split and the startup we were working on pretty much died out. About a month ago, I decided to finally close the corporation. But I quickly realized that closing a c-corp was not as easy as opening one.

“So in total, you owe about $89,000 to the State of Delaware”

Unlike what the title of the post suggests ("Why incorporating my startup was my worst mistake"), the correct lesson to take from this experience is that registering a company is a responsibility. It's not something you do without knowing what regulations will apply to you.

Earlier in January, I advised people to register a business today as a new year resolution. This admonition deserves a follow-up.

Most governments treat businesses as "responsible" entity. They give you very little slack when it comes to following the laws and regulations of business, because they consider business owners to be capable of following a few simple rules. For example, in the UK, if you fail to file your accounts on time, you will get fined. If you file your accounts wrongly, it's your fault, too (not your accountant's, interestingly). Nobody cares that your dog ate the accounts - it's your responsibility as a business to keep records, keep copies of the records, prepare the right pieces of paper and file them at the right times.

Those regulations are, at least in the UK, nowhere near as complicated as they might sound on the surface. Any reasonably diligent and intelligent person (and someone who can learn and apply multiple programming languages definitely qualifies) is capable of learning everything they need to know over a few hours. And the government gives plenty of reminders, too. But you do need to go into this type of venture with your eyes open.

Registering a business is for grown-ups.

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