Speaker A
Okay, today I'm going to talk about how to succeed with a startup. Obviously, more can be said here in 20 minutes, but I will do the best I can. The most important thing, the number one lesson we
Sam Altman shares key lessons on startup success, focusing on product quality, market trends, visionary leadership, and team building.
Key Takeaways
- Create a product that users love and naturally share with others.
- Focus on fast-growing markets and real technological trends.
- Strong leadership with clear vision and evangelism drives success.
- Building and nurturing the right team is critical for scaling.
- Confidence combined with flexibility helps navigate uncertainty.
What the video covers
- Success in startups comes from building a product so good that users spontaneously recommend it to others.
- A product must be simple to explain and address a significant need to gain traction.
- Startups should target markets experiencing or about to experience exponential growth rather than just large existing markets.
- Distinguishing real trends from fake trends is crucial; real trends show obsessive early adopter usage.
- Having at least one evangelical founder, usually the CEO, is vital for recruiting, fundraising, and evangelizing the product.
- An ambitious but organic vision attracts talent and helps build a strong team.
- Successful founders have a confident and definite view of the future, balancing conviction with flexibility.
- Building a great team is as important as picking the right market and product; founders must transition from product builders to company builders.
- Startups thrive by focusing on big platform shifts and leveraging speed to compound advantages over larger companies.
- Internal fire and belief within the team are essential to withstand external doubts and challenges.
Chapters
- 00:00Introduction and Key Lesson on Product Quality
- 01:03Importance of Simple, Clear Product and Market Selection
- 02:09Real vs Fake Trends and Early Adopter Behavior
- 03:09Examples of Real and Fake Trends: iPhone and VR
- 04:24Ambitious Vision and Evangelical Founders
- 05:29Confident Leadership and Vision for the Future
- 06:44Team Building and Transitioning to Company Building
- 07:47Internal Fire, Belief, and Overcoming Doubt
Full Transcript — Download SRT & Markdown
Speaker A
try to teach startups is that the degree to which you're successful approximates the degree to which you build a product that is so good people spontaneously tell their friends about it. Startups always ask us for the secret to success.
Speaker A
They always want to believe it's something other than this because this is really hard to do, but this is it. If you can build a product that is so good people spontaneously tell their friends about it, you have done 80% of the work
Speaker A
that you need to be a really successful startup. If you think about the most successful companies, you know, Google, Facebook, whatever, you probably found out about them because a friend of yours said, "You got to try this, it's great." So
Speaker A
this is the bar: something that people love so much they tell their friends about it. One important indicator for a product like that is a product that's simple to explain and easy to understand. If you can't explain in a few words what you do
Speaker A
and if people don't, if at least some people don't say, "Oh, that's pretty interesting," that's usually a mistake. It's usually a sign of unclear thinking or a need that is not big enough. Another thing that startups need to look
Speaker A
for is a market that has either started to undergo or is soon going to undergo exponential growth. I think this is actually related to one of the biggest mistakes investors make when evaluating startups. Investors always say, "Well,
Speaker A
what's your growth rate? We care about the growth rate." Investors will forgive smallish revenue today if it's growing quickly. For some reason, people don't think about markets this way, but if you think about the most important startups, they are the ones that start in small
Speaker A
markets that are growing very, very quickly. Eleven years ago, the market for iPhone apps was zero dollars; it wasn't huge. And I think if you only think about the TAM today, you'll make a big mistake. What you really want to do is identify a
Speaker A
market that's going to grow every year and be able to ride that up elevator. A really important thing to figure out is learning how to differentiate between real trends and fake trends. A real trend is something
Speaker A
that's actually going to happen, and a fake trend is not, or at least not yet. And before you make a big bet on a new platform, you want to make sure it's real. Now, there's an easy trick for this, which I'll share
Speaker A
now. Real trends are ones where a new technology platform comes along and the early adopters use it obsessively and tell their friends how much they love it. A fake trend is one where people may buy the product but don't use it, or at least
Speaker A
not enough. So an example of a real trend I already mentioned is the iPhone. I'll mention that again. When the iPhone first came out, many people were dismissive because they only sold a million or two million that year, and they said, "Well,
Speaker A
this just doesn't matter." But for the people that had an iPhone, they used it for hours every day. It became central to their lives. They loved it. They told their friends, "You've got to get one." And I think it was obvious then to people
Speaker A
paying attention that something had fundamentally shifted and we had a new computing platform that was going to spawn huge businesses, and it was a good time to bet on mobile apps. A fake trend, or at least a fake trend as of August
Speaker A
2018, I would say, is VR. I do believe VR will be big someday, but today most people that I know that own a VR headset use it never or very rarely. And so although a lot of people talk about it
Speaker A
and maybe even a lot of people buy them, there's not the intense usage per user among the early adopters that I think you want to see before you make a big bet. Another thing that startups need is at least one evangelical founder, usually
Speaker A
the CEO. Someone at the startup has got to be the person that is going to recruit, sell the product, talk to the press, raise money, and this requires someone who can infect with enthusiasm the whole world about what the company is trying
Speaker A
to do and someone who becomes the chief evangelist for the company. It's very hard to succeed wildly without that. It's very hard to build a team at all without being able to do that. One thing that helps for this is having an ambitious
Speaker A
vision. You never want to be grandiose; that turns people off. But you want to let yourself grow more ambitious over time, and as long as you do that organically, people will respond. Ambitious visions are exciting; they're fun to work on. In fact, I think in 2018,
Speaker A
at least in Silicon Valley, it's easier to start a hard startup than it is to start an easy startup. Now, this sounds paradoxical, but ambitious projects are interesting. You know, in the current environment, it may be relatively easy to raise capital, but
Speaker A
it's really hard to do everything else. There are so many startups; it's so easy to start one. They all sound so promising that bringing together enough talent in one organization is really hard to do. And if you're working on a
Speaker A
problem that you know maybe modestly successful, it's kind of easy to get the first two people to join. You can give them a lot of equity, but then it gets really hard. Why is employee X going to join? Why does this
Speaker A
matter to the world? Why should someone work on your startup versus any of the other things they could do? And picking something that matters, if you're successful, is a great way to do that. And so I think it's really important to
Speaker A
think about when you're starting a company, how is this going to evolve into a vision that a lot of people want to help with, but a lot of people want to be associated with? Because I think getting talent and getting mindshare is
Speaker A
really hard in the current environment, and people are interested in startups that matter. Another thing that we've noticed among our best founders again and again and again is that they have a confident and definite view of the future. They may be wrong, and so we
Speaker A
say it's good to be confident and flexible, but this idea that you are confident and definite—this is what I think is going to happen or this is what is going to happen—and being relatively sure of that, having courage of your
Speaker A
convictions, being a clear leader saying, "We're going to do this," and that's why even in the face of a lot of doubt, that seems to really correlate with success. And this comes back to having an ambitious vision. But the entire startup ecosystem
Speaker A
is best set up to support companies that have a low chance of success but are huge if they work. And I think going for something that is huge if it works will attract the best people. Not going to talk too much about the
Speaker A
team. There are a lot of obvious things I could say that have been said many times by many people about, you know, you need smart people who want to work really hard and who communicate well. These are all really true, but I'd like to mention
Speaker A
a few non-obvious things that we've noticed that we don't hear people say as much about the team. You need to assemble the—note Khosla says that the team you build is the company you build, and I really think that's true. I've still met
Speaker A
only a handful of founders, I think, that spend enough time on recruiting, like Mark Zuckerberg is famously one of them. But building a great team, I think, other than picking the right market and building a great product, is the most
Speaker A
important thing you do. All founders go through a transition, all successful founders, where you switch from building a product to building a company. And building a company really is about the team. So you need to miss—the whole world
Speaker A
will be telling you why you're going to fail as a startup if you don't have that internal fire of belief. If you don't have people who say, you know what, we are going to do this, and it doesn't matter what the haters say, we're going to
Speaker A
figure this out. And there is, you know, this problem, it must be solvable. If you don't have the spirit of optimism on the team, it's very hard to.
Speaker A
you need at least some idea generators there are a handful of people in any company that has gone on to be really successful that I that I've been able to work with who are just really good at coming up with lots of ideas you don't
Speaker A
too many these people because that's more ideas than a company can follow through on but having some people within a company that are just constantly throwing out new ideas most of which will be bad it turns out to be super
Speaker A
important to have on the team this spirit of we'll figure it out is my favorite thing to hear among early startup team members a lot of things go wrong the situations that startups win in tend to be incredibly dynamic and so
Speaker A
this idea that even if I'm not qualified on paper even if I haven't solved this problem before even if this problem feels like it's gonna kill the company which many problems will feel that way this spirit among the team of you know
Speaker A
what we've got the people we need we're gonna figure this out we're gonna get this done that's super important another thing that I love to hear from early team members is I've got it so you know you hear in big
Speaker A
companies a lot of people say that's not my department someone else is gonna do that yeah or you know who this is really bad this is gonna hurt us and you want people who just step up and say I'll do
Speaker A
it I've got it don't worry about it you want people to have a bias towards action startups especially in their early days often win by moving very quickly you never get as much data as you'd like you never have as much time
Speaker A
to deliberate as you'd like and you want people who will are willing to act with much less data than they'd like to have with much less certainty and then if they act then it doesn't work they adapt really quickly and try something else we
Speaker A
talk also about the blessing of inexperience we have seen many of our startups do incredible things because no one told them it was hard no one told them they can't do it um there's a great quote from Steve Wozniak about how all
Speaker A
the best things he ever did came from having no experience whatsoever and having no money and you know that obviously is not always true but there is a magic thing that happens with startups especially in their early days
Speaker A
before they've learned they're not supposed to be able to do certain things and so I think as a start-up again doesn't work to have everybody being experienced but you can take more bets than you normally would on inexperienced
Speaker A
but super high potential people that's the end of a topic on on team one of the most important jobs you have as a founder is to never lose momentum and this is a little bit depressing because it means for the first few years you
Speaker A
never get to take your foot off of the gas you never get to really rest we try to be honest about this that startups are not the best choice for work-life balance at all but especially in the early days startups survive on their own
Speaker A
momentum if you have momentum people keep delivering results beyond what they think they're capable of if you lose momentum it's very difficult to get it back and so continuing to make sure that the startup has a cadence that the
Speaker A
startup keeps winning on a relatively predictively short and predictable and this is really important and it's up to the founders to make sure that that you don't lose ahold of this another thing that we think startups need is a competitive advantage over
Speaker A
time now this is something that sounds so obvious I hesitated to even put it in this is well discussed but we're seeing more and more startups apply to YC and when we ask them so what is the long
Speaker A
term monopoly effect here what is the long term competitive advantage what is you know where is the network effect in this business they look at us like it's the first time we've ever they've ever heard this question all of the really
Speaker A
great businesses I know have an answer to this question and in fact the better they are the more they pretend not to but this is something that you you want to have a plan for another thing you want to have a plan for is at least a
Speaker A
sensible business model you don't have to have it all figured out at the beginning but when we ask founders so how are you ever going to make money and they look at us like it's the first time they've ever been asked that question
Speaker A
which happens more often than you would think recently that's a bad sign too again this one is so common that I hesitate to put it in here but when we ask a start-up how they're gonna grow how they're gonna get users
Speaker A
and they look at us like it's the first time they've ever heard that question bad sign so some sensible idea to try here first Paul Buchheit once spent a bunch of time looking one of the YC partners spent a
Speaker A
bunch of time looking at the traits of our best founders and tried to distill down what they were and he came up with a frugality focus obsession and love I actually I think that is really good I don't know how much to add but I think
Speaker A
these are things that you should be able to say about what you're doing and you as a founder and finally I want to talk about why startups get to be big companies we've there are lots of reasons I'm going to talk about a few
Speaker A
common ones here I think these trends are valuable enough that as you evaluate startup ideas you might do it's worth thinking about if you fit into these because it's really hard for startups to beat big companies most of the time and
Speaker A
here are some areas where we see it happening repeatedly so I think one difference is if you are a product manager at a big company and you want to do something that sounds sounds like a bad idea but is a good
Speaker A
idea you have to get everybody from your boss sometimes all the way up to the CEO to say yes so one no can kill you if you're a start-up you can go to I see demo day any number of the thousands of
Speaker A
investors can say yes and you get to have a crack at it so it's a very different mindset and for those ideas that sound bad but are good because of this phenomenon this one no versus one yes startups can win in fact startups
Speaker A
usually do beat big companies in that category of ideas so look look for ideas that sound bad but are good and where you are much more likely to get one yes then someone in a big company is to get
Speaker A
all yeses another area where startups usually be big companies aren't very fast changing markets startups great speed great advantage is an agility and speed the more a market is changing the higher the number of decisions you get to make and the higher number of tweaks
Speaker A
to your product and your strategy you get to make and you want to optimize the number of those decisions that someone has to make to compete with you because a big company will make them on average worse than certainly much slower than
Speaker A
you do so the speed of market evolution gives you a lot more chances to compound your advantage over a big company and then finally startups usually win on big platform shifts many people have observed that startups companies clusters those clusters usually come
Speaker A
after a big platform shift we'll stick with the iPhone example here after mobile apps became a thing many new companies got started that are now quite valuable and one of the reasons here is you know most large companies work on
Speaker A
sort of an annual cadence at least and when there's a huge platform shift they are not good at making a big enough strategic pivot the Battleship just turns too slowly whereas a start-up can say wow woke up this morning the world
Speaker A
is fundamentally different than it was six months ago we're gonna go all in on this new direction and so that's a way that startups usually win or that that's an area where startups usually win there there are many others but thinking about
Speaker A
these three I think is is directionally a good thing to do alright that's all I've got for today Jeff thank you very much for having me and for the class you
Topics:startup successSam AltmanY Combinatorproduct developmentmarket trendsfounder leadershipteam buildingvisionary leadershiptechnology trendsstartup advice
