#87 - Elad Gil - Y Combinator  ## Metadata - Author: **Y Combinator** - Full Title: #87 - Elad Gil - Category: #podcasts - URL: https://share.snipd.com/episode/db9f0a0c-4b03-4c14-a076-465f2f1c6b9d ## Highlights - The Startup Owner's Manual Key takeaways: • There are no good generic startup advice. • Each person's experience is unique, and what works for one person may not work for another. Transcript: Speaker 2 And so that's really what that means. And do you take it to heart for you as well? Speaker 1 I'm too old for that. So I think the next generation is everything is possible for them. Speaker 2 Okay. Speaker 1 Barring some breakthrough in anti-aging or something. I think my path is reasonably clear. Speaker 2 All right, fine. So with all of these interviews, I know they were edited and kind of, they're transcribed and then edited. Were there any large arguments you got into when you're doing the interviews before you compiled them for the book? Speaker 1 There's no arguments. And the interviews are actually very close to the actual conversation. So the editing was very light and it was more for clarity or to rearrange the section. So it went together better. But there weren't big chunks taken out unless it was a side conversation that was unrelated to the interview. There are areas where I've disagreed with some of the things that people said. And that's one of the reasons I wanted to make sure it was in the book. Because ultimately I think the only good generic startup advice is that there's no good generic startup advice. And ultimately it's all about context. And each person who I interviewed came from a very different set of experiences, a very different context. ([Time 0:03:29](https://share.snipd.com/snip/75697c52-bdb7-417b-9039-36cfc77fa408)) - The Power of Charging More Key takeaways: • Startups should focus on the market and the market again when choosing companies to invest in. • Charging more than the competition can help a startup grow faster. Transcript: Speaker 1 Honestly, almost every interview there may have been one or two things that I would have nitpicked. And I'm sure that as people read my book, they'll feel the same way or they're like, well, in my case it really wasn't like that. Or the advice I give is a little bit different from that. And I think that's actually great. It's almost like you're baking a cake. And you can get into a philosophical argument about the right way to bake a cake. And when all is said and done, there's a few core components you always need when making a cake. But there's lots of different ways to do it. And I think that's true of startups as well. There's a few fundamental things you absolutely have to do otherwise it's not really a cake or not a startup. But besides that, go at it. There's all sorts of ways to do things. Speaker 2 Yeah, I was rewatching your investor school talk this morning. And you were talking about how you pick companies based on market and then market again. And then the third was maybe team or something like that. Yeah. Do you find that? I think you got into it with Mark and Driesin a little bit in the same topic, right? And what he said I found was interesting. He said the companies that charge more tend to grow faster. Do you believe that too? Speaker 1 I think if you can get away with charging more than it means that you have a product that people truly want, which means that you can grow faster in part because people truly want your product. ([Time 0:04:43](https://share.snipd.com/snip/570f908d-c3f3-406a-91db-09be610ba4d1)) - The Successful Class of People in Silicon Valley Key takeaways: (* There are a lot of unsuccessful ideas in the crypto world., * Some of these ideas will eventually become successful., * There are already successful crypto companies.) Transcript: Speaker 1 So, for example, Webvan raised over a billion dollars and failed and now we have Instacart which is sort of a reinvention of that concept. There was pets.com which was broadly derided. Why would you ship pet food online? And that became chewy which was acquired for I think $3 billion. And so there was this whole wave of companies that were just too earlier in the wrong format. In the late 90s that have now become major franchises. And I think the same thing is true in the crypto world where there's still a real lack of infrastructure in crypto. And so there's all sorts of really interesting ideas of how you decentralized different services. And I think many of those things will fail. And then in 10, 15 years a new form of that idea will exist and be successful. And then in parallel I think there's things that exist today that are sort of the Amazon's of crypto that are going to be massive in their own right and already exists. Maybe it's Bitcoin, maybe it's Ethereum, maybe it's a privacy token like Monerozy cash. But I do think that a subset of the crypto world from today will also continue to just be massive. Yeah. Speaker 2 And a certain percentage of people out there as employees will be able to pick those companies. Which is a, that's the novall quote I really liked. I don't know if it was in the first or the second interview. That must be the second it's on page 311. Novall says, novall robicon. The most successful class of people in Silicon Valley on a consistent basis are either venture capitalists or people who are very good at identifying companies that have just hit product market fit. ([Time 0:13:43](https://share.snipd.com/snip/33799afa-1649-4496-98fa-c3e53d1e6634)) - How to Work Well with a COO Key takeaways: • Claire Johnson, COO of Stripe, issued a letter to employees about how to work well with her. • This letter is a good way to onboard new employees and ramp up communication with existing ones. Transcript: Speaker 2 Yeah, I see. Okay so we should talk about best practices a little bit. We don't want to just talk about founder mistakes. One thing I really thought was cool which I hadn't heard about before was Stripe COO, Claire, Youth Johnson issued this letter out to the company when she started about how to work well With her. I'm curious, have you done this before? Speaker 1 Do other people do it now? What's the story? Yeah, I haven't done it before. When she told me about it I thought it was brilliant and you know each person as they join a company especially if they're in a leadership role will have a certain set of ways that they like To be interacted with and often it takes the company six months or 12 months a year or longer to figure it out and especially if you're growing really fast each incremental higher or two Years later has to figure it out as well and so by publishing this letter she basically spelt out what are the best ways to work with her? Is it better to send her emails or to catch her life for five minutes? Is it better to communicate via data or you know there are other mechanisms that really resonate with her in terms of the things that grab her attention and so I thought that was just a Brilliant onboarding tool that perhaps any executive joining a high growth company or any manager joining a high growth company should issue so that people just understand this is The fastest best way to interact with me and just you know ramp up on how to be effective in the organization. ([Time 0:17:40](https://share.snipd.com/snip/c2a3d9ee-21b4-418f-bc65-7b2c22a6c64f)) - Tips for Avoiding Hiring Mistakes Key takeaways: • Founders make mistakes around hiring, fundraising, and fighting with their cofounder. • Founders should avoid making these mistakes by having a good selection process and letting go of people who don't work out. Transcript: Speaker 2 And I think a lot of people create in the content category they're often playing the game that whatever system they're on wants them to play. And that's good to a point but you're like it's hard to achieve outsized rewards in any of these categories by just playing by like the exact rules. I'm not saying like break the rules but be a little more creative with your strategy. All right next question. Narayan Maloper asks where do founders make the most mistakes? Is it on hiring? And whatever mistake that might be what steps should they avoid to avoid these pitfalls? Yeah. Speaker 1 It depends a lot on the stage of a company. You know for an early company people make mistakes around how much money to raise. They raise too little and they run out of cash before they can hit a milestone to raise more money. It could be hiring mistakes. It could be fighting with their co-founder. So you know early on I think there's all sorts of mistakes that you can make. I think the single biggest common issue to the point of the question probably is around hiring either in terms of not having a very good selection process or alternatively not getting Letting go of people who didn't work out. And so there's an old saying that people either hire well or fire well and if you at least do one of those then you can build a really good organization. ([Time 0:22:28](https://share.snipd.com/snip/859e6dd1-5436-43eb-9357-b2bb0d432eea)) - The Redemption of the Company Key takeaways: • Companies go through cycles of growth and decline. • It can be difficult to stay positive about a company during these cycles. • It is important to stay aware of the company's current situation and its potential future. Transcript: Speaker 2 You know but being here I'm more optimistic than ever there are so many cool things happening it's just tricky I mean I know it from talking to my family on the east coast who isn't you know Connected in the same way and all they hear horror stories from you know whatever it might be. Speaker 1 Yeah I think in general what you find and this is I've seen on the company level when you work with different companies they always end up in some media cycle where they get built up and Then they get torn down and then later they get built up again as sort of a redemption story. So usually the story arc is look at this amazing company they're changing the world they're doing good things and then there's some minor crisis and it blows up in the press into oh my God these companies now doing bad things and they're failing and they're going to die and it's awful and ([Time 0:28:49](https://share.snipd.com/snip/ef85b63e-a197-4296-a87e-9322209c2161)) - Things a Startup Must Achieve Before VCs or Angel Investors Will Line Up to Fund Them Key takeaways: • A startup must have a high margin, rapidly growing product to be attractive to investors. • It is also important to have a high traction product, meaning that it is being widely used and accepted by the public. Transcript: Speaker 1 Yeah I know it's I think one of the most telling moments for me was a founder that I've been that I started helping really early ping me and said hey I was at some dinner party with some friends And I brought up the fact that I'm really excited about what I'm doing and I hope I can change the world with it and everybody started making fun of me at the dinner and I said well you should Find better friends. That's true. You know like ultimately you should be surrounding yourself with differing opinions over time but you should also be surrounding yourself with positive voices because ultimately Speaker 2 I do think that there's a lot left to be done and technology will continue to have this transformative impact on the world and people should be proud of what they're working on. Yeah yeah I mean I'm all for talking shit and having fun but I think like penalizing people for being eager is not the right thing to do. Alright let's go to another question. So Marius Chawa asks this is such a common question. What are the top three things a startup must achieve before VC firms or say an angel investor would line up to fund them? Speaker 1 There's a huge range of answers to that. If I were to rank things in a hierarchy I think the single biggest thing and this is going to be obvious and we'll sort of work down a hierarchy. The single biggest thing would be to have a high margin rapidly growing high traction product in other words you're growing 30% month over month you have 90% margins and everybody's Buying it. ([Time 0:30:13](https://share.snipd.com/snip/8b38f3e5-a0c5-46d6-96b5-e497ac6b149a)) - How to Hire Engineers in a Sprint Key takeaways: (* It's okay to give yourself permission to screw up a little., * In general, if you start to feel like you have too many people showing up and not enough to do, you've definitely screwed up.) Transcript: Speaker 2 And so it's okay to give yourself permission to screw up a little. Yeah I think it's too easy especially for people who are you know compelled to be makers to get attached to your solution to the problem when in reality it's about solving the problem. Speaker 1 Yeah the only place where I'd qualify that is if you're doing something in healthcare where you know you don't want to sort of move fast and break things if you're building a pacemaker. Yeah you know so if you're actually again this is back to that if you're actually going to hurt somebody you shouldn't do it. Speaker 2 But if it's you know a SaaS product that is around a customer support tool maybe it's okay if it doesn't quite work perfectly the first time you should just be transparent with your customers that it's a new product and it's buggy and iterating. Yeah but it's not cute if the wheels on your autonomous car fall off. Exactly. Yeah that's not a good idea. Related to that there's a question about hiring from Tanmay Condowal. They ask when you're sprinting in growth stage how do you predict the engineers required and hire accordingly. Speaker 1 Yeah there's sort of two things I think the general philosophy should be things should always feel tight. Yeah so you should never feel like hey I have too many people you should always feel like you have too few people. So in general if you start to feel like hey there's a lot of people showing up and not enough to do then you've definitely screwed up. ([Time 0:36:08](https://share.snipd.com/snip/29494313-a1cd-4d31-a67a-c3495ccb2e25)) - How to create a hiring plan Key takeaways: (* Founders should always have a hiring plan in place in order to ensure that they have the necessary resources to build their product., * Fundraising should not be seen as a competition to win, but rather as an opportunity to secure the necessary resources to build a successful company.) Transcript: Speaker 1 Yeah there's sort of two things I think the general philosophy should be things should always feel tight. Yeah so you should never feel like hey I have too many people you should always feel like you have too few people. So in general if you start to feel like hey there's a lot of people showing up and not enough to do then you've definitely screwed up. From a planning process perspective and this is actually something that the Haggard of Handbook touches on with Claire who's Johnson and the conversation with her is there are us at a simple planning processes that you can undergo where you basically start to ask what do I want to build over what time frame how many people do I need to actually do it. What's the relative priorities of these things and therefore you come up with a hiring plan and usually that hiring plan is in staggered over the course of a year. And so even when you're very early on and you're three people or four people and you have to build a bunch of stuff if you've just been funded I would advocate that going into the fund raise you actually have that hiring plan because it tells you what your burn is going to be it tells you how much money you actually need to raise. I think too often founders just say oh I'm going to raise I'm making up a number two million dollars when maybe they should raise three or maybe they should raise less but you know the number feels very arbitrary versus having an underlying plan which says this is where we're going to spend money this is how we're going to spend it this is how long it will last us actually think that's a very useful exercise for anybody to go through and it also then informs what you're actually going to build which is just like basic business fundamentals. Speaker 2 Yeah but very very few people surprisingly few people do it like and I'm aware yeah I'm around it because it's like raising money has been turned into this game that people want to win and that in and of itself feels like an end to them but it's not. Yeah. So alright we have a couple more questions. ([Time 0:37:04](https://share.snipd.com/snip/2d0807d4-7f76-44a9-86a0-44605889a121))