Business

Startup advice for entrepreneurs from Y Combinator

startup school.bmpHere’s a summary of the more compelling tips given by several tech industry luminaries — including Facebook’s Mark Zuckerberg, Google’s Gmail creator Paul Buchheit, Sequoia Capital venture capitalist Greg McAdoo — at the Y Combinator Startup School event at Stanford this weekend.

The event attracted more than 650 aspiring entrepreneurs. Mark Coker, a VentureBeat contributing writer, was on hand and here are his notes.

Facebook’s Mark Zuckerberg: Hire only young technical people

FaceBook‘s founder and CEO, 22-year old Mark Zuckerberg, believes his social networking platform will push the world to be a more open place. Without doubt, FaceBook is a true phenomena. According to Zuckerberg, FaceBook has over 20 million registered users, serving 1.5 billion page views daily.

Judging from whispers among the audience, while people love the service and admire his accomplishments, many find Zuckerberg arrogant. A Google search on “mark zuckerberg” and “arrogant” yields about 675 results, but surely, there must be other Mark Zuckerbergs in the world. Or maybe not.

Maybe it’s part of his charm. He’s the cute boy-wonder robo-geek who is either oblivious to how he rubs people, or he doesn’t care because he’s smarter than us.

He stepped on the stage wearing his trademark Adidas sandals (he bought ten pairs before they were discontinued).

“I want to stress the importance of being young and technical,” he stated. If you want to found a successful company, you should only hire young people with technical expertise.

“Young people are just smarter,” he said with a straight face. “Why are most chess masters under 30?” he asked. “I don’t know,” he answered. “Young people just have simpler lives. We may not own a car. We may not have family.” In the absence of those distractions, he says, you can focus on big ideologies. He added, “I only own a mattress.” Later: “Simplicity in life allows you to focus on what’s important.”

He said it’s important to hire mostly coders, even in the marketing department, so if they want to change something on the web site all they have to do is log into the back-end and change copy on the fly.

The value of having coders on staff, he elaborated, is that technology is highly leveraged. “You can create an app once and people can continue to use it.”

Zuckerberg stressed the importance of rapid application development and iterations. FaceBook ships new code every night, he says.

Several more times during the talk, he spoke of how an important part of his job was thinking about philosophies.

Someone in the audience asked how Zuckerberg balances the whole work and family thing. He answered that he works all the time, and besides, he said, his girlfriend is still in school at Harvard so he’s apparently not distracted by her too much. “But now she’s moving out here so we’ll see,” he added. Presumably, this the same girlfriend Zuckerberg was with when he reportedly shut off his cell phone, delaying acquisition talks with Yahoo for a week.

Paul Buchheit: Gmail’s creator shares startup advice

As Google’s 23rd employee, Paul Buchheit was the creator and mastermind behind Gmail, arguably one of Web 2.0’s first killer apps.

His advice to entrepreneurs was to redefine their measures of success. While financial reward is nice, aspiring entrepreneurs should first and foremost seek out risk-taking opportunities where they can learn. He said startups allow employees to take on projects for which they have no qualifications. He referenced his own multi-year assignment to Gmail as a perfect example.

Buchheit, no longer employed by Google, encouraged entrepreneurs to innovate where tech giants like Google are afraid to. He cited the enormous success of YouTube. Even though YouTube launched after Google Video, he said Google Video was a bad product because Google was politically afraid to offend its media partners.

Paul Graham Asks: What’s stopping you from starting a startup?

Paul Graham made his fortune selling his ecommerce platform Viaweb to Yahoo for $49 million in 1998.

More recently, he has become something of a 21st century messiah for tech company founders. His numerous essays about tech startup strategy, along with his work as a founding partner of Y Combinator, have allowed him to influence a new post-bubble generation of software programmers. Some entrepreneurs are said to listen to recorded copies of his speeches over and over again in an attempt to internalize his gift.

Over the last few years, Graham has encountered a few prospective founders who were unwilling to accept his teachings.

His Startup School presentation answered those objections (VentureBeat has paraphrased):

Concern: Am I too young?
Answer: Don’t worry.

Concern: I’m too inexperienced.
Answer: Do it anyway.

Concern: I’m not sure I’m smart enough.
Answer: If you’re smart enough to worry about that, you’re smart enough to start a successful startup.

Concern: I appreciate the predictability of a regular job.
Answer: Envision yourself as a medieval serf who will till the same soil for the rest of your life. Mind numbing, right?

PayPal Founder Max Levchin: Imagine him as a 15-year old girl

Max Levchin was a co-founder of PayPal, which was acquired by eBay for $1.5 billion in 2002. Today, he’s founder and CEO of Slide.com, a service that reaches 50 million people per day with its hosted images and slideshows.

Levchin offered attendees a crash course in product management. Product management, he says, is 85% user interface and 15% channeling the user.

For user interface, Levchin told the audience to measure how their visitors interact with the sites. Slide.com tracks mouse clicks, mouse overs, abandonment rates, the funnel, and more. Levchin and his team mine the data for intelligence that helps guide future iterations of the site.

For channeling the user, Levchin says founders must step inside the minds of their target customers. In Levchin’s case, he says he must imagine himself as a 15-year-old girl with attention deficit disorder who’s looking for digital bling to dress up her MySpace or Zanga web page, while at the same time she’s chewing gum, talking on the phone, instant messaging with five friends, listening to music, and twirling her fingers through her hair.

Levchin cautioned his techie audience to keep their customers in mind and not go overboard with technology for technology’s sake. He pointed to the early social networking site, Friendster, which lost critical momentum when it ran into scaling problems because of a “cool” feature that calculated friend trees, and caused page load times of up to a minute. MySpace.com, by contrast, was successful because it cared less about technology and more about the user experience.

As a final word of product development advice, Levchin encouraged founders to think about the Bible’s seven deadly sins – especially greed, sloth, envy, pride and gluttony. These characteristics, he said, describe many of the primal motivations for users.

Ali and Hadi Partovi: Brotherly super duo provide tips

For those who say lightning never strikes twice, they haven’t met the Partovi twins. Ali founded LinkExchage, which was acquired in 1998 by Microsoft for $250 million. Hadi founded TellMe, recently acquired by Microsoft for a rumored $800 million. The brothers now jointly run the music discovery service iLike, and its popular independent music web site, GarageBand.

The Partovi brothers’ presentation focused on the do’s and don’ts of startup success.

They said the best businesses are easily scalable, so that a doubling of revenues won’t require a doubling of expenses.

Founders should create naturally viral businesses, like the invitation automation service eVite.com, in which one user’s use of the service causes others to use it.

The sites should also exhibit network effects, so as the number of customers increases, the overall value to all customers increases.

The brothers encouraged founders to listen closely to their customers, and cited online shoe seller Zappos.com, as a strong example of a company which cares about customer experience. Zappos requires all new employees, even senior executives, to man customer service phones for at least four weeks as part of their training.

The brothers warned founders to maintain a razor sharp focus on their company’s primary purpose. Ideas are a dime a dozen, they said. Founders should pick one thing and do it well. They cited eBay’s acquisition of Skype as an endeavor that could spread the company too thin, and distract it from its main auction business.

They said companies must make hiring a top priority, and should cultivate and protect their company culture. Perhaps just as important, founders should learn to quickly fire bad hires, because a single bad hire can poison morale.

Lotus Founder Mitch Kapor: Don’t forget culture and diversity

Over his 30+ year career, Mitch Kapor has shown an uncanny knack for identifying disruptive waves of technology innovation early.

He created Lotus Development, one of the first spreadsheet companies. He was an early investor in UUNet, one of the first Internet service providers, as well as in Real Networks and Linden Lab, operator of Second Life.

Kapor also stressed the importance of creating a great company culture. He said founders set the culture, and it’s important to understand every action or inaction of the founders sends a message to employees. Hire great people, embrace diversity and resist trying to fit every employee into the same cookie-cutter mold, he said.

Kapor, who once worked at Valley VC firm, Accel Partners, advised entrepreneurs to tread cautiously with venture capitalists, and to understand where their interests are aligned and where they diverge.

Venture funds typically invest in a portfolio of 30 companies. They expect one or two big winners to supply the majority of the portfolio’s returns. Kapor says this can lead VCs to pressure their portfolio companies to go for the home run and risk striking out completely, when more sensible logic might dictate swinging for a single or a double instead.

Sequoia Capital’s Greg McAdoo: What VCs want in a start-up

Sequoia Capital is one of Silicon Valley’s oldest and most respected venture firms, investing in 550 companies, including Google, Yahoo, and Cisco.

McAdoo stressed the importance of clarity of purpose. Founders should articulate their vision for the company in a single sentence. When Cisco approached Sequoia, for example, they didn’t say, “We build routers.” Instead, they said, “Cisco Systems networks networks.”

McAdoo underscored the importance of the founders understanding their audience. He said good founders also exhibit intellectual honesty about the strengths and limitations of their technology, their management team and their competitors.

McAdoo said it’s impossible for a single company to create major waves of technology disruption, but stressed founders’ businesses should be built to ride the waves. Founders should also identify the trajectories of other trends that will impact the business, whether technology or political (such as likely changes to copyright law).

McAdoo says Sequoia prefers to invest in companies whose target customers have their “hair on fire,” meaning they’re desperate for an immediate solution, and don’t care if the fire hose comes in red or purple.

Asked if Sequoia funds companies outside of major tech regions, such as the Midwest, McAdoo said yes, but the firm prefers its funded companies locate in either Silicon Valley or Boston’s 128 corridor. Hiring is easier in the tech hot spots, and the support ecosystems are better adapted to meet the unique needs of tech startups.

Mark Coker is a contributing writer for VentureBeat. He’s founder of Dovetail Public Relations, a Silicon Valley technology marketing firm. He has no clients among the companies mentioned in the story, nor among their competitors. More on Mark at http://www.linkedin.com/in/markcoker


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