How to Start a Startup is a multi-part series on the intricacies of creating, sustaining and dominating the startup sphere derived from Y Combinator’s Lecture Series
Welcome to Startup 101. In Part 1 of our series, we discussed the basics of Starting Up and what one needs to keep in mind while starting up one’s entrepreneurial journey. In this part, we will discuss how to build your team and execute your plans while not thinking about competition.
Choosing Co-Founders And Building Relationships
The type of relationship shared between the co-founders is the most important aspect when it comes to team building in general. They are, by a long shot, the most visible people in a startup, and the relationships set by them help set the pace and tone of almost everything that goes on within a company’s walls. How two or more co-founders gel amongst themselves can determine a lot about the success of the startup. Even investors can smell bad relationships between co-founders from a mile away and is often a red-flagged during funding opportunities. The funny thing is, a co-founder can simultaneously increase the chance of success while also being the primary cause of failure, so be careful while taking these decisions.
Brian Armstrong of Coinbase suggests a unique method to select a co-founder: “Seek out someone who intimidates you. Someone who makes you work more than you were at that point. Someone who makes you think, smarter than you and a good communicator. Try getting someone aboard who is extremely efficient and has a wide breadth of knowledge. If your prospect is a yes on all counts on your checklist, then you’ve found yourself a competent co-founder.” Yet, many make the same mistake in choosing the wrong co-founder. Deciding on your co-founder is not like a dating – where you find someone you can simply get along with. It is one of the more important decisions in your organization’s life. Choose someone you have a long history with, preferably someone from your workplace or your college class. That’ll motivate you to not give up when bumpy roads appear in your way.
You must be thinking why there is a stress on having a co-founder. Well, yes, it is true that you should rather have no co-founder than having a bad co-founder, but it’s still quite bad to be a solo founder. A good cofounder will complement your weaknesses and thereby increase your chances of success.
Sam Altman of Y Combinator says, “you’re looking for cofounders that need to be unflappable, tough, they know what to do in every situation. They act quickly, they’re decisive, they’re creative, they’re ready for anything….quite like James Bond.”
Rules Of Hiring
Don’t hire if you don’t need to. When you’re starting up, many people will ask you one question, “How many people do you have working under you?” And weirdly enough that is the metric people use to measure how successful – and – cool your startup is. Avoid allowing your subconscious to actively work towards maximizing social rewards. Hack your mind to redefine cool as a tiny team leveraging enormous impact on society and the world. Having many employees causes your money to have a high burn rate, where you’re losing a lot of money every month. Having less employees is much more cooler than having more employees. Always remember, Instagram had 13 employees (including the founders), when they were acquired for $1 Bn. Now, that is pretty cool.
Eventually the efficiency of your team members determines the value of your startup. Smart people know that picking a startup to work for at the early stage based on compensation is silly. They look for hyper growth. Compensation will always come in later. Remember, if you compromise and hire someone mediocre, you will always regret it. Ask yourself these three questions before hiring and you shall be set: Are they smart? Do they get things done? Do I want to spend a lot of time around them?
If it’s a yes to all three parts – you’ve found your employee. Facebook’s Mark Zuckerberg uses a different policy and you can use that as well to choose your team: he says that he tries to hire people that, firstly, he’d be comfortable hanging with socially and secondly, he’d be comfortable reporting to if the roles were reversed.
If you’re building a new company, don’t be too stingy in distributing the equity stakes between your employees. Ideally, 10 percent of your company’s equity should be distributed amongst your first ten employees. That way if they stick along long enough, their contributions make up for the stake you’ve given them anyway.
From a CEOs perspective, execution has four easy (ok, not too easy) tasks: setting a vision, raising money, evangelising the mission to other business peripheries and manage the team. But, the fifth task is the most important one of them all – it requires the CEO to set a bar. Most CEOs don’t envision this to be a part of their job, but leading from example is probably the most critical job of the CEO and only they can help achieve it.
You need to ask yourself two questions: “Can I figure out what to do?” and “Can I get it done?” The tough part of the Founder/CEOs work is that there will be a hundred different issues competing for your attention. Learn how to identify the important few tasks, and then ignore, defer or delegate the rest of these tasks efficiently. Unfortunately the trick to great execution is to say no a lot. Be prepared to say no, nine out of ten times, and good founders make a conscious effort to do this. Altman says, “One of the great and terrible things about starting a startup is that you get no credit for trying. So if you work really hard on the wrong things, no one will care.”
Have small overarching goals which everyone in your company knows about. Achieving many small targets will eventually help you reach your final goal. The Founder/CEO’s level of focus will trickle down to the rest of the employees in your organization.
These tips and tricks help budding entrepreneurs understand the core requirements and thought processes needed to succeed in the Startup world. In part 3, we will talk about ideation and the counterintuitive parts of a startup.