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

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.

Elad Gil's engineer hiring process   ✶

For an early startup, I believe you have to be much more efficient than this ten-step process - and I'll cover my process for recognising technical talent in a later article - but as the company scales, you need to put in place hiring processes which work even with dozens or hundreds of employees. That's when "heavy" recruitment processes come in.

Here's Elad Gil's hiring process:

  1. Resumé screen
  2. Phone screen 1 - culture fit and "reasonable to set up a technical call"
  3. Phone screen 2 - engineering interview
  4. In person interviews
  5. Discuss the candidate
  6. Half to full day of work with the team
  7. "Beer test"
  8. Reference checks
  9. Offer
  10. Close

Have a read through the article for much more detail.

Hiring well is hard   ✶

Paul O'Connell documents his startup's hiring journey, first figuring out why anyone could possibly want to work with them, and then going through many phases:

  1. Talking to their network
  2. Talking to groups, communities and meetups
  3. Talking with students
  4. Talking to recruitment agencies
  5. Looking at offshore options
  6. Pushing the recruitment drive online

They finally arrive at the apparently disappointing conclusion:

There aren't really alot of conclusions to be made from such a fluid process like this apart from Europe has a shortage of talent. Finding more innovative ways of attracting the hot resources that are developers and making the company somewhere you love to work at is definitely a must, this is a startup, so culture is everything!

While we haven't found the right ‘first employee' fit yet we do recognise that as long as we continue the drive for another member of our team, it will happen when it needs to happen. Things happen not when you want them but when you need them. So our journey continues. Wish us luck.

But I think that's much better than settling for 'ok'. "Ok" is a terrible idea when it comes to your first few hires.

Motivation

One thought from my own experience: what will motivate someone to work with you on your early startup is typically your vision and drive made tangible. If you don't have a concrete plan that sounds like what they want to do, they probably won't be motivated. "Come join us, we have no idea what we're doing!" is not a convincing pitch. Would you work for a company that doesn't really have a clear direction or business?

One is reminded of the parable of the three stone-cutters:

A traveller in the middle ages happened upon a building site. Curious, he asked one stonecutter what he was doing.

The man replied curtly, "I am cutting a stone," and went on cutting his stone.

The traveller approached a second stonecutter and asked the same question.

"See there, this line? I am building a wall there," the second one replied.

Finally, the traveller asked a third stonecutter. The third man stopped what he was doing, and looked at the traveller with tears in his eyes, and said: "I am building a cathedral!"

If you don't have a clear vision and plans for a cathedral, you may struggle to attract any great startup employees (though it might still happen by luck).

Sad, tired and alone - or not   ✶

Zak Homuth discusses his perspective on getting depressed while running a startup:

The highs are higher, and the lows are lower. If you're a founder you've felt like this before. If you're about to startup you will feel like this someday. And it's ok. It's baked in. You quite simply can't change the world in a couple of years without doing more than most people do in a lifetime.

That's true, but...

I am currently in the midst of the deepest, darkest, and longest depression I have had in the last 2 years of my life. Possibly ever. (...) 82 weeks ago I started my third startup. Since starting Upverter I've felt this depression about a half a dozen times, I guess once a quarter. Its normally just a really, really bad day. Sometimes longer. (...) For me, the sadness normally means I hide. I sleep. I stare at my screen knowing what I need to do, but not doing it. I eat too much or not at all. And I drink. Im at a coffee shop right now writing this - and its the first time I've left my room in three days. During school and Sandvine I got fat - like 265lbs fat. It was pretty bad. I was able to lose the weight (80lbs), but it wasn't easy - it was a lot of support, a lot of friends and family, and a lot of quiet-time introspection.

This seems a little bit extreme.

Everyone has up days and down days. Most of the people I've worked with consider me to be very productive. I don't sit around and do nothing... or do I? I regularly have days when I just can't summon the energy to do anything. Even in the midst of being extremely busy, there'll be the odd day (probably once every couple of weeks at the very least, sometimes once a week) when I just don't do anything at all for a whole day. No blogging, no working, barely answering emails, etc. You know, one of those kinds of days where you just feel like you wasted the day.

It sounds very much like what Zak describes, except for one huge difference: I don't call it depression. I accept it as a natural side-effect of the way my brain works.

As Zak rightly points out, "the highs are higher, and the lows are lower". That's not just a function of being a startup founder, but simply of having the kind of highly creative, driven, productive mind that can even consider starting a startup. Certainly, the pressure of running your own business (particularly if you've taken funding and/or people's livelihoods depend on you) will exacerbate both the highs and the lows (not many jobs give you the high of earning yourself £100k in one day - or the lows of failing to earn it when it was just within your reach).

However, whether it is "depression" or simply a natural low is a matter of perspective. Instead of fighting the lows, I embrace them. I learn to recognise "those days" as symptoms of my brain telling me "hey, today I'm on a break." Instead of trying to force myself to work through that (which rarely works anyway), I embrace it and allow myself to not do anything. I allow myself to let go, to feel like nothing is working out (despite evidence to the contrary), like everything is out of shape. What enables me to do this is the knowledge that a) it's temporary, I'll feel different tomorrow, and b) it's ok, I'm productive enough the rest of the time to make up for a day off every now and then.

Sometimes the answer to being down is simply to accept that it's ok to be down, and do something else while you wait for it to pass.

People will do what they want to do   ✶

In the "what do normal people do with computers?" register (which we already saw some time ago here), here's an jaw-dropping example of how normal people will circumvent limitations of hardware and software to get their jobs done.

And if they can't circumvent them, they'll just not use it.

The headwaiter then picked up what Richard first thought must be some kind of new, electronic touch-pen, and moved it toward the screen. Richard is a tech savvy Internet entrepreneur, and therefore quite curious about what kind of new gadget they used at this restaurant. So he leaned in and looked a little closer ... and suddenly realized that it was a perfectly ordinary whiteboard felt-tip pen. The headwaiter just draw an "X" over their booking, directly on the computer screen!

Drawing X's on the screen and wiping them off at the end of the evening. Genius.

Customer Development is not a Focus Group   ✶

Steve Blank notes:

Any idiot can get outside the building and ask customers what they want, compile a feature list and hand it to engineering. Gathering feature requests from customers is not what marketing should be doing in a startup. And it's certainly not Customer Development.

In a startup the role of Customer Development is to:

  1. test the founders hypothesis about the customer problem
  2. test if the product concept and minimum feature set solve that problem

Collecting feature lists and holding focus groups are for established companies with existing customers looking to design product line extensions

Startups are short on time. Serving multiple customer segments requires more features and pricing plans and support and marketing and everything. That's tough for a young startup to bear and few would intentionally choose the extra work. Still, we can fall for the trap accidentally as Steve described.

By consenting to every feature request, you end up serving multiple customer segments. But focus means saying "no". Part of the early goal of talking to customers is in determining which of the many available segments you really want to focus on. Then you can say no to everything else.

Where to find a business partner   ✶

David Alison:

There are lots of reasons people want to work with a partner when starting or growing a business. In many cases a partnership happens out of a shared passion; two or more people discuss an insanely great idea and before you know it they are sketching out a product or business plan on a cocktail napkin. Then there are those that have an idea but recognize they need someone that has skills they lack or maybe want to share the crushing workload that comes with starting a business.

He proposes the following key methods

  • Find cofounders amongst your friends and colleagues;
  • Use the social web to meet potential cofounders;
  • Always be networking

Cultivate your network carefully and over time you will find that what you are really doing is inserting yourself into a new community, one populated by fellow entrepreneurs that are hungry to build up their business. You may not find a new business partner overnight but in time either the right person will pop up on your radar or you will have learned enough that maybe you don't need that partner after all.

Of particular relevance is this HN comment, which clarifies a very important point:

Never force the relationship. Network - but do it to meet new people not specifically to find a partner.

The way I like to put it is that networking to find a cofounder is like going to a party to find a wife. You might meet lots of interesting, and potentially eligible, partners while out networking/partying, but those who respond favourably when you mention what you're looking for on the first "date" are probably not the ones you want to marry.

It sounds very tricky and Zen-like to say you should go out networking, but you will only find a good cofounder if you're not actively trying to find one, but, sorry, that's the way human relationships work, in both the business and personal cases!

Should you pay to pitch your startup?   ✶

BetaBeat's Adrianne Jeffries:

So how much is too much? "I've always been curious as to why people think pitching should be free," Ultra Light Startups founder Graham Lawlor wrote in an email. "I think each event is unique and startups should evaluate paying to pitch as an investment, alongside their decision of which lawyer or web host to use. I like to believe startups that pitch at Ultra Light get far more than $50 worth of value in exposure and feedback (and sometimes prizes). I suspect the people who think pitching should be $0 are not running many events themselves."

I have no problem, in theory, with companies paying to present at an event. However, let's call that what it is: it's a promotional presentation. Presenting it as "pitching", i.e. as an activity directed at investors for the purpose of getting funding, is misleading at best, and downright dishonest in some cases.

Promotional presentations shouldn't be free. Pitching should. Patrick McKenzie puts it best on HN:

It's a sign that you're entering hugely, hugely seedy territory if you ever are asked to pay to receive offers of employment, scholarships, or investment. First, many out-and-out scams operate that way. Second, if the opportunity were legitimate, there is an adverse selection risk. Meritorious candidates for employment/scholarships/investment have no interest in paying to get a chance at them, so those candidates would avoid that opportunity like the plague. The decisionmaker, if they have two brain cells to rub together, knows this and charges anyway. Why would you ever take investment from someone who had a declared policy of only entertaining pitches from the bottom of the barrel? (Plus, egads, what does that say about you to follow-on investors or other parties you need to sell?)

Why Ty Danco is investing in CardMunch   ✶

An excellent dive into the mind of an angel investor, and how he perceives and analyses deals:

There are just 3 inviolate areas for any investment: 1) A large, addressable market; 2) a capital efficient business model which can create good margins; and 3) great people. The first two I don't even have to consider carefully—you can normally disqualify a deal that doesn't cut it in less than a 2 minutes. But most everything else takes some time. My rough weights are as follows:

10% Product: (with at least a beta product up and testable)

60% People: Who is the team? (Past experience, past SUCCESSFUL experience, technical chops, hunger, humility, coachability, advisory boards) Do I believe the CEO? Do I like them?

10% Distribution: Who's leading sales? Can they sell at the Startup (as opposed to Big Industry Leader) level? How will they reach customers? Also pricing, sales cycle, staffing requirements, etc.

5% Operations: Is this scalable? Tested technology? Dependable outsourced vendors?

5% Social proof: Who else is investing, and do they bring anything besides money?

5% Price and Terms

5% Everything Else

Worth a careful read if you're thinking of raising money.

Hand to wannabe "product guys"   ✶

Is a potential business cofounder pitching himself as a "product guy", without any evidence that he can do it? Aaron Harris has an answer for them:

The first, and I suppose seemingly easiest claim and means to justify your place in the startup world, as someone who has no experience, is to call yourself a product person.

But that claim generally comes with a fundamental misunderstanding of what it means to do product. It is not code for a person who doesn't really know how to do anything but thinks he can boss engineers around. It doesn't refer to marketing guys who had an idea. Understanding what it means to drive a product means understanding the full scope of the vision of your company. It means understanding your engineering team, their capabilities, and their priorities. It means understanding what your next move is, and what your 6th move is from every angle.

Aaron also proposes a development plan for people who want to become product guys in reality as well as in title, which involves both practicing the craft and reading some product development classics.

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