- CS183F is a class teaching about the first 100 days of a startup
- The guest speaker is Dustin Moskovitz, co-founder of Facebook and CEO of Asana
- The talk is about why to start a startup and helps individuals think about their motivations
- Starting a company is difficult and the odds of becoming extremely wealthy are small
- Joining an established company can also lead to financial success and may be less risky
- Joining an established company can also maximize impact and provide access to a large user base and infrastructure
- The lifestyle of an entrepreneur is portrayed as glamorous in the media, but in reality, it is stressful and requires hard work
- Being a founder does not always give control over how time is spent.

- Being a founder does not necessarily give you control over how you spend your time
- Founders spend most of their time on tasks they cannot delegate and are always on call
- Starting a company may not be the best way to maximize financial impact or reward
- The best reason for starting a company is when you feel like you can't not do it
- Passion is important for powering through the challenges of starting a company and recruiting great people
- Being the right person to bring an idea into the world is valuable, but consider doing it within an existing company if appropriate
- The challenges of starting a company today include competition, recruiting talented individuals, and high costs
- The probability of success varies for early employees and founders, with more information available to early employees
- Finding a core team can be organic and dependent on personal networks
- Passion for a project should lean more towards pathological obsession rather than just an interest
- Having a co-founder is important, but finding the right person can be challenging and it is recommended to work with someone you have known for a long time.

- Silicon Valley is special because of the belief in the future and the support for wild ideas
- Startups should focus on original ideas and not just copy what has worked before
- Startups should identify the next great wave of technology and build something on that platform
- It is easier to start a hard company with passionate people than an easy company
- Co-founders should have a shared history, determination, and match values
- A great product is the most important thing, and it is better to have a small number of users that love you than a lot of users that like you.

- Retention and frequency of use are indicators of users who love a product
- Building a great product is crucial for success, other factors matter but are secondary
- Talking to users means digging deep and understanding their preferences, habits, and feedback
- Strategies for getting the first 100 users include reaching out to personal connections, charging for the product, targeted emails, and social media/marketing efforts
- Building a great company involves getting to know users well, iterating quickly, making a long-term commitment, staying lean until things work, and hiring great people
- Relentless execution, not giving up, and taking care of oneself are important for startup success
- Having a clear mission is essential, but it doesn't have to be figured out on day 1.

- Successful startups quickly figure out an important mission that drives them and attracts others.
- Clear communication of this mission is crucial for convincing people to join and building a successful company.
- When hiring, prioritize values and passion alignment over specific skills.
- Practice and collaborate with others to generate good ideas.
- Start fundraising when it is easy to raise money and when it is needed.
- Know when to switch from searching for product-market fit to scaling up based on the demand for your product.
- The moment to scale up will be evident when you are overwhelmed with work and there is high demand for your product.

- CS183F is a class about the first 100 days of a startup, with guest speaker Dustin Moskovitz, co-founder of Facebook and CEO of Asana.
- The talk discusses the motivations and challenges of starting a startup, and highlights the potential benefits of joining an established company.
- The lifestyle of an entrepreneur is portrayed as glamorous but is actually stressful and requires hard work.
- Being a founder does not always give control over time management.
- Passion is important for overcoming challenges and recruiting great people.
- Starting a company may not always be the best way to maximize financial impact.
- Silicon Valley supports wild ideas and focuses on originality.
- Co-founders should have a shared history, determination, and aligned values.
- Building a great product and understanding user preferences are crucial for success.
- Strategies for getting the first 100 users include personal connections, charging for the product, targeted emails, and social media/marketing efforts.
- Relentless execution, clear communication of mission, and taking care of oneself are important for startup success.
- Prioritize values and passion alignment when hiring.
- Start fundraising when it is easy and needed, and know when to scale up based on demand.

Sam Altman, President of Y Combinator, and Dustin Moskovitz, Cofounder of Facebook and Asana, kick off the How to Start a Startup Course. Dustin discusses Why to Start a Startup and Sam introduces the 4 key components of Starting a Startup: Idea, Product, Team and Execution.
 http://www.slideshare.net/StevenPham7/lecture-1-how-to-start-a-startup-by-sam-altman

Explore Stanford Online courses: https://online.stanford.edu/explore

We'll hope to make it a really great class.

So we're going to try to teach you what you need to know for the first 100 days of a startup.

Basically, how do you go from a very raw idea to a company?

I have been teaching this people for a while.

And so hopefully we'll be able to make this make a lot of sense.

Today, our guest speaker, besides me, is Dustin Moskovitz.

Dustin was the CTO, was the co-founder of Facebook and CTO and VP of Engineering, I just learned, and is now the co-founder and CEO of Asana.

Dustin gave a talk at the first version of this class that is still the 1 I refer other people to the most.

And it's about why to start a startup, which is actually a really important question and 1 that people don't think about enough.

So he was kind enough to come back and do that again.

So if you're here today, you're watching the video later, you're probably planning to start a company, that's why you're taking the course.

And most of the class is going to be about how to go about doing that and achieving success.

But before you dive into the how of being an entrepreneur, I'm here to help you think about the why.

So it's important to know which reason is yours so that you think through the decision correctly.

So I hear a variety of common motivators from potential entrepreneurs, but I found that once they've fully considered the trade off, they often decide that starting a company isn't actually the best way to achieve their goals.

So I'll help you make sure you're choosing the best solution.

And I'll also explain the reason I like to hear best from people about why they want to start a company, what I hear when I think someone's really set up for success.

So I've given this talk before, as Sam said, and a bunch of people have come up to me after and said it really helped them with their decision.

And in a few cases, they decided that they shouldn't start a company and they should really join an established 1.

But I know a lot of you are resolved on what you're doing.

I think this will still be useful for you because you'll get a better sense of the reality of what you're about to go through.

So it's not a long talk, it's just about 10 slides, and I've left some time for questions at the end.

A lot of people become entrepreneurs specifically as a way to try to become extremely wealthy.

So they see themselves starting the next Facebook or Google.

However, the odds of being that successful are actually incredibly small.

So only a handful, an entire generation of companies actually end up getting to that scale.

So here's a funnel from CB Insights actually.

It shows how many seed funded tech companies get through each round of funding.

So even if we reduce our ambitions a bit to becoming a unicorn, so a company with a billion dollar valuation, you still have incredibly long odds.

So only 1% of seed funded companies get all the way through this funnel.

Now getting to 6 rounds of funding, it's not exactly the same as becoming a unicorn, but it's pretty well correlated.

Most of the unicorns I know had to have at least that many rounds of funding.

So to get there, you have to have a truly great idea.

It's gotta be unique, defensible, going after a large market.

You have to execute, sorry, you have to execute extremely well.

So that means you have to work hard, you have to attract the right people, and you have to have a better strategy than your competitors.

And you also just have to be really, really lucky, because there's a lot of things that can get in your way, and a lot of them aren't even in your control.

So I've talked to a bunch of investors, entrepreneurs, and the sense is that it's actually getting harder over time to get through this funnel.

So not only are more people starting companies, meaning you have more people to compete with, but they're becoming more expensive to operate for a lot of reasons, particularly here in the Bay Area.

And investors have higher expectations too, so you've seen valuation multiples start to decline, particularly on the public market.

And perhaps most importantly, it's becoming harder to disrupt incumbents.

So they're not the slow moving giants that they were 10 or 20 years ago.

They know how to take advantage of their market position.

So, some of you are thinking, sure it's hard, but you get so much more equity as a founder that it's clearly the only way to make a lot of money.

So let's talk about 2 different ways that you might get to a great financial outcome.

You started a company that does Uber for pet setting.

So in this picture, this is the customer, not the founder.

And it's a great idea and you executed it well.

So you sell the company at some point for $100 million.

And if you've been really successful limiting dilution, your equity might be as high as 10% of the company at that point by the time it becomes liquid.

However, I just showed you only a small portion of startups make it that far, so this is the lucky case.

$100 million, a little easier than $1 billion, but it's still extremely rare.

And it's actually most likely that you end up with nothing on this path, because you just end up shutting down the company for whatever reason.

And oftentimes you see a company sell to and acquire this kind of range evaluation.

In a lot of those cases, the founder still ends up with nothing because of investor liquidity preference.

So it depends a lot on how much money you've raised to get there, so this is definitely the high risk path.

But another way to make a similar amount of money is to join a later stage company and help them scale from say 500 million in valuation to 20 billion.

So even straight out of college, you can do really well financially by joining a company at that stage.

But especially if you have a few years of experience, you're going to get a really good options package and you're going to have a fairly high salary too.

So I just sort of swagged 5 basis points here.

If you joined a little earlier, it might be more than that.

If you have more experience, it might be more than that.

But this is sort of a, a good sort of benchmark.

And you probably know the market for experienced tech workers, it's extremely competitive right now, particularly for product roles.

So if you choose well, you can also walk away with $10 million by taking this path.

And if you choose really well, and you do find that next Facebook or Google while it's still not yet a unicorn, you can do extremely well.

So the 100th engineer at Facebook had a way better financial outcome than the vast majority of entrepreneurs.

So, of course, it's still possible you'll choose the wrong company, won't grow enough for this kind of outcome.

This is actually 40X growth, which is pretty impressive.

But the key is you get to join it much later in its life cycle, so you have a lot more information.

You can see the performance so far, you can meet some of the team, you can understand the competitive landscape.

And even if you don't find a company that's going to grow this much, you've got a good chance of picking 1 that's going to grow some.

In fact, your equity value is probably already non-zero.

So you've got a pretty good chance of having a positive outcome in that situation and maybe a really great outcome.

And then finally, if you found a company, you have a long term commitment.

So there's a good chance you're going to be putting 10 years or more into making it scale, and you still may fail in the end.

Whereas If you join an established company, you can work there for a couple years.

You can get a sense of whether it's growing.

If not, you can easily leave and try again.

So you can actually work for several different ones in that same 10 year period, and that really increases your chances of a home run.

So the ultimate takeaway here is there are multiple ways to get a great financial outcome.

But it's a lot lower risk to join an established company.

Don't worry, not all of these will be arguments about why you should join an established company.

So similarly, a lot of people want to start a company in order to maximize their impact.

So usually financial outcomes pretty well correlated with that.

So a lot of the arguments I just made apply here as well.

But when you join a company that's already established, you get some big advantages.

So you get access to their existing user base, might be hundreds of millions, sometimes a billion people.

You get the ability to work on top of infrastructure that's already been built out and scaled.

And you're collaborating with an established team, so they're going to help you succeed.

So I want to give some concrete examples of massive impact that people achieved as an employee.

So Brett Taylor, who's the head of Quip, before he became an entrepreneur, he joined Google after it already had over 1,000 employees, and there he was able to spearhead the creation of Google Maps, which is used by hundreds of millions of people, including me on my way here today.

Similarly, my co-founder at Asana, Justin Rosenstein, he joined Google at a similar time.

And there he prototyped Gchat inside Gmail.

So this was over 10 years ago, still used by a ton of people.

And then Shortly after that, he went to Facebook, after it had a few hundred employees, and he led the hackathon project that created the like button.

Some of you have probably used it once or twice.

So, you can still join teams at Facebook and Google today and work on something that literally might reach a billion people.

So that's a lot of impact, even if your contribution is a relatively small portion of the product surface area.

So if you want to become an entrepreneur to maximize impact, these are the types of stories that I think you should be comparing the opportunity to.

So everyone's got their own story about what it means to be an entrepreneur.

So in general, the media likes to make it seem glamorous, emphasizing launches and funding milestones.

They tend to talk about success cases and ignore failures.

And the entrepreneurs themselves are like ducks.

They're calm on the surface, but they're paddling like hell underneath.

But you only get to see them on that surface looking passionate and focused.

So the first image here is from The Social Network, which is a fictional movie about the founding of Facebook.

And the last image is an actual photo from the founding of Facebook.

So reality is a lot of heads down time doing hard work.

We hardly had any time to bust open champagne and spray it all over our laptops.

So in practice, tech is a little less like the social network and more like Silicon Valley.

1, your team is relying on you, so they're betting some of their best years on the story you've told them.

And their recruiter's pinging them constantly, like many times a week.

So you're always worried you're going to lose them.

Each round of fundraising feels a little like life and death, and your competitors are actually trying to kill you.

And you always feel stretched then, because it's hard to make time for the company, your significant other, your family, and yourself.

So of course, my title here is a reference to Ben Horowitz's book, The Hard Thing About Hard Things.

If you want to go way deep on this subject, I definitely recommend giving that a read.

So relatedly, people also think being a founder will give you control over how you spend your time.

There's a great quote from Phil Liban here.

So Phil and I both learned this the hard way, but you don't actually have control in practice.

So I spend most of my time working on the problems I just couldn't delegate.

Reacting to issues that are popping up or resolving conflicts.

And you're always on call, so it makes it hard to really unplug during a vacation or on the weekends.

So if you take your foot off the gas, then so will your team.

So that said, this 1 really doesn't apply if you want to have a lifestyle business, if you're a small business entrepreneur.

If you do that, then you actually do have a lot of control over your lifestyle, but the financial and impact outcomes are going to be smaller.

All right, so this is a recap of those first 4 topics.

So these are the top reasons I usually hear from people.

So the success funnel that I showed you in practice suggests that startups aren't clearly the best way to maximize financial impact or, sorry, financial reward or impact.

So you might do better by joining an established company.

And then Similarly, the reality of entrepreneurship doesn't usually match what you see in the media.

So if you want to aim for a home run, you should feel committed to putting in the many years of effort and discipline that it takes to become a professional athlete.

So now that I've given you a bunch of bad news, let's talk about what I see as the best reason for starting a company.

So passion is really important, since we just talked about how hard it is to start a company.

So you're going to need that passion to power through.

And you also need it to recruit great people to follow you as a leader.

And then the second part of this is that you're the right person to make this happen by starting a company.

So if you fail to do it, you're actually going to be depriving the world of something great.

So this implies that the idea itself is really valuable, and it also implies that you're the best person to bring that idea into the world.

If you're not the best person, then that best person's out there, and they're probably going to out-compete you and create something even more valuable.

So 1 twist on this is maybe you're the best person, but you should do it within the context of an existing company.

So I often feel this way when I hear someone describe something to me that really sounds like a feature of an existing product.

So if you want to have like the next twist on photo sharing, I definitely recommend considering Instagram or Snapchat and helping them build it into their products.

So you can be entrepreneurial inside the context of an existing company.

So I've twice chosen to become an entrepreneur myself, and both of the times were motivated by this reason exactly.

So for Facebook, we actually continued to be students at Harvard until the site had over 100,000 monthly active users.

So we had cognitive dissonance for kind of an embarrassing long period of time that we could just be students and have this little side project on the side.

But eventually it pulled us out, because we couldn't bear the idea of it not living up to its full potential.

And then similarly at Asana, Justin and I were both reluctant entrepreneurs.

But we thought the problem of work tracking was really important and that the other people working on it were going to develop incremental solutions and leave a lot of value on the table.

So we couldn't stop working on it, and eventually we decided to leave Facebook and focus on it full time.

So when I meet entrepreneurs that really seem set up for success, this is usually the reason I'm hearing from them.

They're starting a company because it felt like really the only thing that they could do next.

So feel free to just raise your hands and I'll call on you and repeat the question for the mic.

Someone always has to break the bubble, but like 10 of you have questions.

How do you decide if it's like, or how do you advise people to decide if it's, if the best way is to go do this at some other company or do it themselves?

Like it's easy in the photo sharing example, but in the real world, most of the time, is a little bit murkier.

So what's the framework you think through about?

1 is just the sort of feature not company distinction that Mark and Jason has talked about.

So I don't know how to make that concrete, but it's just sort of like thinking about the idea, is this like a separate product that it feels like somebody's going to sign up for, can it have its own monetization model?

Are people really going to invest in learning a new system, or does it really feel like the add on on top of some existing model?

And very related to that, I think, are just going to be the competitive nature.

So if you have to introduce a whole new photo sharing app, right, and then you have to compete with the distribution and network effects of the existing ones, that's a huge barrier to entry.

And there's sort of similar metaphors in other products.

I was wondering what's your thought on the challenges starting a company when you started a company and starting a company today?

Yeah, so I sort of briefly outlined them when I was talking about the funnel.

The question was about the difference in challenges between starting a company basically in 2004, first starting a company today, or the second time in 2009.

So I sort of outlined them when I was talking about the funnel.

But I definitely think it's just a lot more competitive in terms of the other businesses out there.

So there's just like most of the valuable markets have interesting players already.

It's also very competitive in the recruiting market.

So it's really hard to get a big enough team of sufficiently talented people.

And those people are going to be more expensive.

So that's 1 of the ways that costs have gone up.

There's also a bunch of other ways, including just like real estate in the Bay Area is really expensive right now.

Some other costs have come down, like data center costs.

But in general, it just feels higher friction and harder to get going.

So I mentioned there's a comparison between startup, like being a founder and being a late stage employee.

So how do you position early stage, say like maybe the first 10 people.

Yeah, it's just somewhere on that spectrum.

So the original, so sorry, the question is what's the difference between being a sort of late stage or a later employee at an established company versus being like an early employee, Is that the question?

So I think of it as just a spectrum on the risk scale between like founder and like 1,000th employee.

So if you're in the first 10, you have a little bit more information.

You know who the founders are, you know who the leaders are.

Hopefully they've already done a seed round or an A round.

But usually you still don't have evidence yet about the revenue or the monetization and probably a product that isn't scaling yet.

So it's just sort of continuous spectrum and the earlier you are, the lower your salary is going to be, the lower the sort of probability of a positive outcome is gonna be.

But you also have a possibility of a really big outcome, cuz you might have 50 basis points or 100 basis points if you're 1 of the first employees.

Yeah, so the probability of a successful early employee and founder is approximately equal?

So maybe the second employee, so the question was, isn't the probability of success basically equal?

For the tenth employee, no, they've got a lot more information.

And like the 20th employee, they've got even more information.

So it's just going to be a continuous spectrum.

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How and Why to Start A Startup - Sam Altman & Dustin Moskovitz - Stanford CS183F: Startup School