- Reid Hoffman believes that within the next 50 to 100 years, another cognitive species with similar or better cognitive abilities than humans will be created, either through artificial intelligence or a different version of the Homo genus.
- Hoffman believes that inventing successful products requires a deep understanding of human nature and humanity, which many people cannot articulate.
- When starting a company, it is important to build a strong network, think about how to break through the noise, and have a theory about human nature and how your product fits into it.
- The early signs of an idea or product's potential to break through the noise can be seen through traction, understanding distribution, and having a coherent theory.
- For consumer products, a unique theory combined with an understanding of distribution is important, while for enterprise products, mastery of traditional enterprise techniques is crucial.
- The ability to fail fast and seek early proof of being on the right track is important, and people often give up too early.

- The speaker believes that people often give up too early in their ventures and should have a theory or plan B in place before deciding to pivot.
- When seeking funding from top tier VCs, it is important to have a referral and present something unique and game-changing.
- The ability to understand and address risks, as well as having a structured conversation and a lightweight pitch deck, is crucial when approaching VCs.
- The pitch deck should include hypotheses, the business sketch, competition analysis, distribution strategy, and an understanding of terms and agreements.

- Venture firms typically commit to a company until it reaches its exit or fails
- Most VCs target a 20% or greater ownership in a company
- The goal for a $500 million fund is to have a $2.5 billion return
- "Blitzscaling" refers to the strategy of scaling a company quickly to establish market dominance
- Entrepreneurs often make the mistake of either waiting too long or scaling too quickly
- It is difficult to pull back after raising a large round of funding, but having a good partnership with investors can help navigate this situation
- Identifying and hiring good people, while maintaining company culture, is a challenge when scaling quickly
- Codifying company culture and using networks for hiring can help address these challenges.

- Using your network is important for hiring, but it can lead to a lack of diversity.
- Reference checks are valuable in assessing a person's work over time.
- Asking for ratings on a scale of 1 to 10 can provide insight into a candidate's performance.
- Spending a significant amount of time with a candidate is crucial, especially for executives, to ensure alignment in values and problem-solving techniques.

- Reid Hoffman predicts the creation of a cognitive species with similar or better abilities than humans in the next 50 to 100 years.
- Understanding human nature is crucial for inventing successful products.
- Building a strong network, breaking through the noise, and having a theory about human nature are important when starting a company.
- Traction, distribution understanding, and a coherent theory indicate the potential for an idea or product to succeed.
- Unique theories and distribution understanding are important for consumer products, while traditional enterprise techniques are crucial for enterprise products.
- The ability to fail fast and seek early proof of being on the right track is important.
- Having a theory or plan B in place is crucial before deciding to pivot.
- When seeking funding from top tier VCs, having a referral and presenting something unique and game-changing is important.
- Understanding and addressing risks, having a structured conversation, and a lightweight pitch deck are crucial when approaching VCs.
- The pitch deck should include hypotheses, business sketch, competition analysis, distribution strategy, and terms and agreements understanding.
- Venture firms commit to a company until it reaches its exit or fails.
- Most VCs target a 20% or greater ownership in a company.
- Blitzscaling refers to scaling a company quickly for market dominance.
- Entrepreneurs often make the mistake of waiting too long or scaling too quickly.
- Good partnership with investors can help navigate the difficulty of pulling back after raising a large round of funding.
- Identifying and hiring good people while maintaining company culture is a challenge during rapid scaling.
- Codifying company culture and using networks for hiring can address these challenges.
- Using networks for hiring can lead to a lack of diversity.
- Reference checks and ratings on a scale of 1 to 10 provide insight into a candidate's performance.
- Spending significant time with candidates, especially executives, ensures alignment in values and problem-solving techniques.

So, up next, needs no introduction, I'll give a very quick 1.

Reid Hoffman has been in, yeah, please give a round of applause.

You know what, it sounds like you all know who he is.

For the first question, tell us something you believe to be true that very few people agree with you on.

Well, this room actually may actually agree with this.

But I think this is when you count the globe.

That question always has to be indexed against the population.

But what I would say is that we have an extremely high likelihood that within the next 50 to 100 years, that we create another cognitive species, e.g.

A species with a similar kind of or better cognitive abilities than we do.

People in this room normally tend to think that's artificial intelligence, but actually I think it's a jump ball between that and a different version of the homogenous.

Like We're in actually a relatively interesting and unique period by which Homo sapiens is the only part of the homogenous, because there was Florences and Neanderthal and so forth.

And when you consider longer time frame, it's actually 40,000, 50,000 years ago is actually not that long ago.

And it's conditioned upon, are the particular breakthroughs in AI, which I think there is still some invention and magic to get a truly generalized AI which may or may not happen quickly.

If it does, then AI is likely, and if it doesn't, then the homogenous is likely.

Just for fun, and you don't have to answer this if you don't want, But given that you made the point about indexing that question against the rest of the world, and that many people in this room may agree with that, although I would still bet most don't, what is something that you believe that very few people in this room would agree with you on?

In this room, okay, trying to index that.

I guess, well this might be they hadn't thought about it.

I think that 1 of the things that's actually really important for inventing products is a fairly deep sense of a theory of human nature and humanity.

And so I think that anyone who is inventing the kinds of products that we typically do, you should actually in fact be able to articulate a relatively robust theory about what is human nature, what is humanity like now, and where is it going, and how does your product or service fit into that.

And that may not be so much they disagree, as actually most people I talk to can't articulate a particular robust theory of human nature.

And that's 1 of the reasons why years back, as you know, I started saying this thing I invest in 1 or more of the 7 deadly sins, because I was trying to get people to think about what is actually in fact, kind of common human psychology.

And if you're trying to create a mass market consumer application, what are the parts of what it is to be human that you're actually triggering, responding to, serving, et cetera?

I bet most people in the room don't think about that or don't agree it's important.

So I want to talk about 3 main topics here.

1 is not the mistakes that people make when they start a company, but the great things people do.

Everyone worries about trying to avoid mistakes.

You also have to do 1 thing really right.

The second is how to raise money from Greylock.

And the third is how to scale up a company and when to start that.

What are the things that you see entrepreneurs do at the very beginning that are the opposite of mistakes, that lead them to great results?

So I think 1 of the, let's see, we could probably spend the whole half hour entirely on this, but I'll try to do that.

That's why I gave you all 3 questions up front, so you could allocate time.

So 1 thing is, build the strongest possible network around you, right?

And every single thing you're doing, whether it's hiring, whether it's getting investors, whether it's who you're talking to about your company, obviously YC, is an opportunity to generate a really strong network.

And I think, and specifically in terms of not just like what do you think of my idea, that's usually a weak question.

If my idea were to fail or my plan were to fail or my strategies fail, why do you think it would fail?

I think another thing is to actually think about 1 of the challenges is it's awesome that we have gotten to such a massive entrepreneurial environment here.

But, for example, breaking through the noise is really tricky, so you actually have to really test and think about whether or not your idea will be sufficient to break through the noise.

And so folks who really think about, like, some way that they can either, you know, grow on a particular platform or have a particular way that they can actually get good growth into their product is, you know, a particular thing, sometimes that's virality, sometimes SEO, sometimes other things.

What are the early signs that an idea or a particular product may be able to break through the noise?

What do you look for when you're evaluating that?

Because I think that is this critical thing, but it's so hard to really know.

Well, obviously, the obvious braindead thing that everyone knows is once you see traction, you still have some questions.

But that actually answers a bunch of those because you can study the actual, like, okay, are people engaging, are they re-engaging, how do they discover it, and you can, you can per thing, you can deconstruct the answer to your question.

The real challenging 1 is when you have the theories beforehand.

And the theories beforehand, a little bit of that comes back to what I was saying in terms of a theory of human nature.

Because you say, okay, why is it, if it's viral, why will the virality spread?

Some of that's technique, but some of that's also, it'll trigger a funny bone in some way.

Now, I wouldn't have looked at Pokemon Go and said, well, actually, in fact, this nostalgia thing will create a craze.

But I learned, along with lots of other people, I downloaded and played with it immediately and said, okay, how do I learn that pattern?

What was the way that was fitting into people's identity?

Why was this the thing that was creating something that literally spread through essentially word of mouth?

It became a habitual thing that I would do during an Uber ride.

I'll just admit I was 1 of those people for a couple of days.

Like, 3 in the morning, my brothers and I would be out driving around Golden Gate Park trying to catch Pokemon.

No, for me, it was when I got an Uber that I pull it up and I go, because you know, you have the advantage that someone else is driving you and yet you can go through all the polka stops and everything else at a reasonably fast clip.

And so the other thing is, is there a principally pre-traction?

Actually, let me distinguish between consumer and enterprise.

In consumer, the principal thing is, there is actually an interestingly unique theory.

There's some kind of theory, together with some, like, understanding about how distribution works, that you're applying.

Like, you say, okay, I actually think people will send out SMS messages or they'll send out emails or this will get indexed and searched the following way or people will actually in fact do the following activities which will cause other people to discover this app, site, service.

And that can sometimes be sufficient for doing it.

On the enterprise side, actually sometimes clear mastery of traditional enterprise techniques is what matters.

Because actually in fact if you have a relatively high, like a good product in terms of what you could sell, you could measure its results, you know what your sales channel looks like, a sales process can work effectively.

But those 2 things and the ability to pull them off are absolutely essential to the things that you do right.

Because the most classic problem, which you've seen, and I know you're talking about the successes here, but the classic problem is I've got a cool idea where someone doesn't have a unique product yet, and that's radically insufficient.

You're making it just lucky whether or not actually in fact the distribution works, and these companies only grow to enough throw weight if they get to a point where they have enough distribution.

So roughly speaking, 1 of the rules of thumb that I use is if you don't see a path by which you're getting to 100 million a year in revenue and then have good growth after that, you have 0 chance of being a standalone tech company.

Maybe 1 more, but then I do want to make sure we move on.

So then the other things I think to do right are, I think the key things are people who, when you're doing this, this is the fail fast point, which is you're looking for the earliest possible proof to whether or not you're on the right track.

It isn't that you're trying to fail, but you're actually hunting for the quickest end.

And sometimes it's even argument evidence.

Like, for example, when I literally had the idea for LinkedIn, I was going around to my friends going, OK, why won't this work?

And the common pattern I was hearing is because in a network there's no value until you have a million people, so no one's going to invite for the first million people.

And the fact that I was, that I knew that that was the thing to test, that was the thing that I was essentially working on from day 1 to get to the minimum viable product in order to do that.

Do you think that people give up too early related to that?

Or at least they're looking at the wrong metric?

1 of the things I see great founders do really well is not give up too early.

And It sounds simple, but in this kind of culture of, you know, try something, if it doesn't work, fail fast, stop.

I do think you can lose a lot of great companies.

Like, for example, when I'm talking to an entrepreneur for the first time, 1 of the things I test for is kind of what I call flexible persistence, which is they'll both listen and hear to the things I'm saying, questions, and they will adopt, they'll think about it, they'll respond, they may be willing to consider the alternate.

But then they also have conviction in their point of view.

They have a theory, a theory of humanity, a theory of distribution, a theory of product, that they go, look, I've really thought through it, and there's some really good stuff here, and this is why it is.

And if you don't have both, You almost certainly fail.

And part of that is people say, oh, I'll just pivot my way there.

Have a deeply thought theory about what you're heading for.

And so plan B frequently is not, oh, now I'm doing something entirely different.

Usually plans B are slight variations and tests.

So if you list your hypotheses about what it is you think you're gonna, why you're gonna win at the startup game, then you start testing them.

Part of plan B is to say, well, maybe hypothesis 3 isn't right, but 3 prime is, right?

And I can just shift a little bit of what I'm doing this way, and then it can work.

And so, like for example, like 1 of the thoughts that we had very early in LinkedIn is, even though we made a very heavy bet on individuals, is would we need to shift to enterprising companies and groups as a possibility to make it work.

It didn't turn out that we needed to do that, but that was a, okay, as a plan B.

And I think that staying persistent ultimately really try it, like you want 2 or 3 points reducing your confidence before you really decide to pivot

So in the interest of time, let's move on to raising money If I want to come raise money from Greylock What can I do to be successful?

What What is step 1 and what is the last step before the check and everything in between?

So first, and this is true for all top tier VCs, is you're much stronger off getting a referral.

Well it can be a referral from 1 of the partners at Y Combinator, but it's the, here's why you should pay attention to this.

I probably get somewhere between 30 and 50 unsolicited decks in my email every working day.

Counts as a good intro is someone that I know and trust and respect.

So you have to guess it to some degree, but here I'll throw you under the bus.

The second is, look, again, think of there's tons and tons of startups.

And your average – every venture capitalist looks at like 600 deals a year and funds between 0 and 2 of them.

Which means you're looking for something that is a little like your opening question.

You're looking for something that's seriously unique.

You're looking for something that says, look, It doesn't have to be the only thing in its field, although then if it's a bunch of things in its field, why will this 1 be the 1 that will break through?

Why will this 1 be the 1 that creates the interesting company?

And so that's part of the reason why what I suggest to people who want to come talk to us is to say, well, what's the thing that either has suddenly opened up or the thing that makes your thing going to be very big when you realize there are thousands of startups now?

Which is great, but, you know, given you can fund between 0 and 2.

And so, for example, you know, 1 of the ones I did at the beginning of the year is 1 called Convoy, which is essentially Uber for regional trucking.

And actually that 1 took a bunch of work for me because there were a bunch of people doing that.

And I had to look through to see which 1 was the 1 to do because we can only do 1.

And what did that founder do to convince you that that was the 1?

Well first I came in through a great referral which is Hadi and Ali Portovi who had done a whole bunch of work and had chosen us.

Second is in the discussion of, like, literally in the very first discussion, I got a very good sense that the founders, Dan and Grant, understood the game in front of them.

They understood what the issues were, they had thought about, like for example when I pushed them about what the comparisons and thoughts with Uber were, what was unique about this space, why actually in fact this is a very different network than an Uber network, what the challenges might be, and they had actually thought about all of it.

It doesn't mean they have perfect answers and it doesn't change, but they had thought about it.

The way they were developing their product was in line with that thinking and they had a story and this is 1 of the things that's super important is like what is – it's not to say you say I'm – like what's uncredible is you say I'm guaranteed to be successful.

I'm coming in as a seed series A and I'm guaranteed to be successful.

And that either says to me that you're crazy, because you don't actually understand the risk, or you're lying to me.

And both of those are not great outcomes from a viewpoint of a partnership.

And so it's much better to say, here are actually in fact what I see the game in front of me, here's what I think the risks are, here's how I'm addressing the risk, here's how I'm measuring them, this is how I'm doing it, and by the way I have confidence that I'm going to succeed.

And so that ability to understand what the game is in front of you, because then you'll parse it the right way.

I think it's very important to have an ability to have structured conversations early.

It doesn't necessarily mean you have to have a deck.

Some conversations I have are literally just, here's my set of beliefs that make me believe this startup's a good idea.

It's like the list of the investment theses, the kinds of things that would say why it is this would be, you know, 5 to 7 years from now, this would be Airbnb.

This would be something that you would go, oh my gosh, this is a world changing company.

Generally speaking, I think it's good to have at least a lightweight 1.

And that's lightweight is like 10 to 15 slides,

And could you just go quickly through what you expect to see in those slides?

Like what are the main 5 or 6 critical topics?

So I presume you guys point people to the LinkedIn Series B deck that I published.

So Reid published his LinkedIn Series B deck.

It's online, and you should check it out.

So this is, roughly speaking, you should open with, here are the hypotheses that back the investment thesis, and that should be probably no more than 7 bullets.

Usually it's more than 3, but something in that could be 8 if it had to be.

And then your slides are the backdrop of those bullets.

So for example, there is actually a space for a professional network separate from a social 1.

It'll solve this thing in people's lives.

That sort of thing is the kinds of things that are in it.

And it can get distributed through virality, right?

Then I think you need to have something about like, okay, what's the mature business sketch look like?

It doesn't mean like, oh, here's my fake Excel revenue projections, which anyone with a brain knows you can make these things look like anything.

But it's like, it's a, oh, we're charging people like this.

This is why we'll have a defensible position.

This is why we'll be at a big size and this is why we'll be growing.

And so, for example, that was 1 of the reasons why the Airbnb pitch was really good from the beginning.

It's like, well, we're eBay for space and we're starting with travel and travel itself is huge and this is what the dynamics work in terms of opening up liquidity between host and traveler.

That was 1 of the pitches literally 2 minutes in, you're like, okay, I understand.

And by the way, you understood the risk then too.

The risk where like, well, actually in fact people aren't used to this, and opening your house, and is there a trust and safety issue, and is there a regulation issue, and you know, all these kinds of things.

But those are, then, these are known risks that you're then working against.

To claim 0 competition is usually not credible.

Usually it's, here is why the competition has a very different angle of attack than I do, and this is why my angle of attack would work.

And then, more or less, for example, in early stage consumer companies, why it is I think distribution is going to work.

And then, can you give us a little bit of sense of how you think about terms, what terms are important to a venture firm, to an entrepreneur, and what a series A might look like?

So to a venture firm, part of the key thing is, so there's a big difference between angels and ventures.

Angels can invest in a wide variety of things.

They don't actually commit to doing that much.

They do commit to doing a little bit of help, but not that much help.

Venture folks commit to, I'm with the company more or less until it gets the port or not.

I can only do really, it's very rare that a firm can do ones that are competitive, so I can only do 1 of the space.

And I'm gonna throw a bunch of resources behind it.

Andreessen Horowitz, we, other folks have great recruiting practices, a number of things like that as a way of doing it.

Like at Greylock, our thing is we help our portfolio companies find an engineer every alternative day during the year, and that's a pretty good flow.

Typically, the best way to do it is very clean terms have either 1 or at most 2 leads.

2 leads tend to be more on the enterprise side than the consumer.

Somebody who is really going to roll up their sleeves and work with you, that usually gets for venture to a certain percentage.

Typically, and it's actually not an artificial number, most VCs target a 20% or greater ownership because when they do their models of what their baskets of ownership are on exits, if they have north of 20%, then they can make their fund multiples work.

And so that's the reason why that's the target.

What is, this is a venture firm that has a $500 million fund, what is the return on that fund that a firm would like to hit to be really great?

Typically you would want to have $2.5 billion of return gross.

That's before the GPs take their carry in.

That isn't the 10 plus x fund that all the top tier firms have hit at some point.

There are funds where you get that, but that's a, oh, that was a credible fund.

So now I want to move on to the last topic.

When you've done things well, you've made a good company, you've got a product people like, you've raised a series A, and now you transition to scale up.

What does that mean, and how do you know when it's time to do it?

You can find it at Greylock and some other places, I think, on iTunes, called Blitzscaling.

Because we were essentially actually building on the class that Sam and Selpham done 1 or 2 years earlier.

And The key thing is first mover means first to scale.

And most often, both within the consumer enterprise, the first to scale is the person who wins, who owns the market, who sets the terms, who gets the best advantages from the capital market, who gets the best advantages in the talent market, is known to customers, et cetera.

It isn't necessarily the first out of the gate, it's the first to scale.

And so what that means pretty logically is your question would be is, you know, typically, comfort for investors, for entrepreneurs, is to say, well, let's completely resolve product-market fit and then scale.

And if you can do that, and because you're doing it sufficiently by yourself, you don't have aggressive competitors, great.

You can more or less understand my distribution model's working, my engagement model's working, I have a revenue model that at least is basically works and maybe can be improved, and now what I'm just doing is figuring out how to accelerate that as much as possible.

More often than not in Silicon Valley, you've got part of that story right, but you have intense enough competition that you have to make a decision to scale sooner than that.

And part of calling it blitzscaling, like 1 of the key things that if you actually look around at part of what's happened in the last 20 years is that actually in fact, startups will spend a bunch of capital at less efficiency than you would typically think because like perfect operational efficiency, we know exactly what our model is, we're rolling it out, in order to get to scale fast and obviously Uber is the canonical modern example of this.

And the decision to do that is partially a question of both kind of offense and defense.

Offense in terms of, well, I really need to establish myself, I need to get to critical mass in the network in order to have the network effects.

This is kind of like early LinkedIn, although we eked it out in terms of, we didn't actually blitz to the first million.

We kind of compounded until we got there.

So we were doing the other strategy because there was no 1 doing our strategy all credibly close to us so we can take time.

Or defensive, which is you're worried that someone else is going to get there first and so you actually have to put in the afterburners and then try to adjust as you go.

And that's the combination of offensive and defensive reason is part of the decisioning that you're making about how and when to do it.

See all Y Combinator transcripts on Youtube

Reid Hoffman at Startup School SV 2016