The Startup Playbook by Sam Altman is a wonderful starting point for potential founders looking into what to expect or what to be aware of when they start a startup. This post is to give a summary of the insightful writing with the most important points that I thought were worth noting.
- A startup's initial goal is to make something users love. Acquiring more users is next.
- Making a product that a small number of users love is harder than making a product that a large number of users like.
- Doing a startup is hard, but that doesn't mean it will risk your career.
1. The Idea
- What to check for:
- Is the answer to the idea clear and concise? Can it be communicated well?
- Who needs the product? Is it at least you?
- Is the user base growing? If so, at what speed? If not, why?
- Is the product generating revenue? If not, why?
- To test an idea:
- Try to launch it (usually for consumers).
- Try to sell it (usually for enterprises).
- Try to discuss it (usually for hard tech).
- Feedbacks from users are important, both getting them and understanding them.
- Focus on the market's present state and the pace at which the desirable future state will be reached.
- New ideas are better than derivative ideas, but derivative ideas seem easier to approach.
- The best ideas initially sound bad anyway so don't fear too much about sharing them.
- If you're forcing yourself to come up with an idea, you're probably not ready to do a startup.
2. A Great Team
- Great founders are:
- People who you want to work with.
- Rigid with their beliefs but flexible to changes.
- Unusually responsive.
- Great communicators.
- You need a cofounder who can do what you can't and who can stick around through hardships.
3. A Great Product
- A great product loved by users is the most important thing to becoming successful.
- Growth hacks will work up to a certain point, but a great product will take you beyond that.
- Setup a "product improvement" cycle in which you repeatedly hack your product and listen to users.
- Recruit users one at a time (i.e. "do things that don't scale").
- Iterate in small steps with a fast pace.
- Be obsessed with product quality.
4.1. Great Execution - Growth
- Measure momentum through clear and simple metrics that the company can optimize on.
- Keep a list of problems that are blocking growth.
- Don't be fooled by vanity metrics, such as focusing on user acquisition rather than retention.
- Establish an internal cadence to keep momentum.
- Set and review periodic goals.
- Talk about strategy internally as much as possible.
- Don't worry too much if fast growth is breaking things, as fixing optimization is easier than fixing growth.
- Don't try to scale out beyond 10x your current scale.
- Focus on percentage increases rather than absolute numbers when checking growth.
- Create growth by making products loved by and shared by users. Have great customer support.
- Utilize sales and marketing after creating a great product.
- For B2B, track revenue growth per month and beware of longer sales cycles.
4.2. Great Execution - Focus and Intensity
- Focus on growth and product goals one by one.
- Stay focused and move fast by getting small stuff done quickly and decisively.
- Manage intensity by finding ways to get 90% of the value with 10% of the effort.
- Don’t get caught up in early success and spotlights. You're far away from finishing the game.
4.3. Great Execution - Jobs of the CEO
- The only universal job description of the CEO is to make sure the company wins.
- Be super responsive to your team and the outside world.
- Do "whatever it takes" so that your team members can learn from the same mentality.
- Have relationships with other CEOs to prevent from becoming lonely.
- Make things happen instead of making excuses.
- Distort reality for others but not for yourself.
- Be persistent and optimistic.
- Be responsible for defining missions and values for the company early on.
- Build a cultural religion.
- Use your creativity on your products instead of trying to reinvent the wheel.
4.4. Great Execution - Hiring and Managing
- Don't hire until you need to, since each new employee will add orginizational complexity and communication overhead.
- The people you want are usually people who have lots of options, so be generous to them with equity, trust, and responsibility.
- Use 25% or more of your time during recruiting mode.
- Never compromise the quality of people you'll be hiring.
- Never hire negative people.
- Put aptitude, intelligence, and track record over experience.
- Try doing projects with people before hiring them.
- Find mentors who can help you become a good manager.
- Fire quickly to protect your culture.
4.5. Great Execution - Competitors
- 99% of the startups die because of internal problems rather than competition.
- Ignore competitors until they are beating you with real products.
4.6. Great Execution - Making Money
- Making money is simply by making people pay more than the cost of your product.
- Try selling the product yourself.
- Juggle between direct sales or various user acquisition models depending on the customer lifetime value.
- Try to repay your customer acquisition cost in 3 months.
- First aim at making enough money to control your own destiny (i.e "ramen profitability").
- Watch your cash flow.
4.7. Great Execution - Fundraising
- Money should only be taken when you need it, when the terms are good, and when the company has the potentials.
- Investors look for companies that will grow fast.
- Anything other than a "yes" is a "no," and don't get upset if you hear so.
- Utilize investor's FOMO by talking to them in parallel.
- Terms or great board members are more important than intermediate valuations.
- Check what values the investors can add.
5. Closing Thoughts
- Execution is always worth more than the idea.
- Turning an idea into success is by having a great combination of idea + team + product + execution.