I decided to make the trek out to Berkeley to check out this year’s Startup School (and to let it serve as a serious peptalk–it’s working). Startup School has been held since 2006 by the folks behind Y Combinator, a venture capital firm that specializes in funding early stage startups. Teams can raise up to $20,000 and get advice from and connections to some of the top folks in startups.
Speakers this year were: Paul Graham, the founder of Y Combinator; Chris Anderson, the editor of Wired and author; Jason Fried, founder of 37 Signals; Tony Hsieh, CEO at Zappos; Greg McAdoo, partner at Sequoia Capital; Biz Stone & Ev Williams, founders at Twitter; Paul Bucheit, founder of FriendFeed and creator of Gmail; Mitch Kapor, founder of Lotus and creator of Lotus 1-2-3; and Mark Zuckerberg, the founder of Facebook.
Paul Graham (Founder of Y Combinator)
Paul Graham started off the morning rehashing his list from the essay What Startups Are Really Like.
Greg McAdoo (Partner at Sequoia Capital)
McAdoo showed up as the lone VC in the group of presenters and gave practical advice on getting users and pitching VCs.
- Prefers personal introductions rather than pitches out of the blue. He recommended contacting the founders of companies he’s funded and asking them to introduce you to him. Left the audience with email address (mcadoo at sequoiacap dot com), however.
- Do your research on who you raise money from (due diligence goes both ways).
- Focus on disruptive market opportunities. “The cost of penetrating an incumbent market is higher during a recession.”
- Sequoia wants big markets. They’ve funded the likes of Apple, Cisco, Google, PayPal, and the list goes on.
Jason Fried (Founder at 37 Signals)
I’m personally biased toward thinking a lot of Jason’s talk since I identify with most of the stuff he’s already said elsewhere. First off, contrary to the whole idea of Y Combinator, Jason’s a fan of self-funding startups. He highlighted two differences between bootstrapped companies and funded companies, i.e., a bootstrapped company looks to make money while a funded company looks to spend money. Furthermore, Jason says being a bootstrapped company helps you get used to making money in the first place. It’s a skill. On that note, Fried said, “The more you practice, the less difficult it will be.”
More high points:
- “Planning is guessing, so then you can take it a little less seriously.” He’s never been a fan of business plans or extensive design documents.
- “Software has no edges–software is not affected by physics. Nothing pushes back and it will start expanding over time. We (developers) need to be the edges. Keep things out of your software.” This goes back to 37 Signals’s book, Getting Real–specifically, Start with No (Make features work hard to be implemented).
- “You can’t make just one thing: everything you make has a by-product.” 37 Signals has made a juicy side business out of selling what they know and most of the time that content comes straight from their blog. He gave the example of sawdust and how it used to be a waste product. Now, it makes up plywood and the bedding for guinea pig cages. Everything has a by-product. Monetizing that stuff goes back to making money and how “the more you practice, the less difficult it will be.”
- “USEFUL > Innovative” Don’t put something out just because it’s cool, but really doesn’t add any value.
- “Someone anointing you to be successful is bullsh-t!” Explains why he didn’t take investment in 37 Signals until much later in the game.
- “Failure is not a rite of passage.” You don’t necessarily have to fail. Fried goes on further to say that, “What you learn from your mistakes is not as valuable as what you learn from your successes.” Whether we’re talking about life or startups, I think he’s both right and wrong, i.e., my time in college is littered with failures that I learned more from and now appreciate more than if I’d been successful in those same situations. Each case is different.
- On pricing, he asks the simple question, “Would I pay for it?” That doesn’t help fully determine the price, but it’s a good way to figure out if you have something people would pay for.
- “Price forces you to be really damn good.”
- “People say 9/10 businesses fail, but what does that have to do with you? Those are their failures.” I liked this as a kick in the head not to take too much to heart what people say about failure in business. People like to scare with statistics, of course, but why not shoot to be the one that doesn’t fail?
Chris Anderson (Editor in Chief at Wired)
Anderson has really been a huge advocate lately of giving stuff away–not to the point of becoming a non-profit, but instead, offering free products in order to get people hooked enough to pay. Obviously, it’s not a new idea, but it’s one startups have really come to embrace. Fred Wilson coined the term freemium for that idea back in 2006.
In Anderson’s eyes, free users are not freeloaders. Instead, free users are a way to expose apps to the widest possible audience. The goal then, is to find a way to get people to pay for a better version of the app (or whatever is being sold) once they’ve fallen in love with the free version and need something it doesn’t offer but other paid versions do.
What will people pay for? According to Anderson:
- People will pay to save time.
- People will pay to lower risk.
- People will pay for things they love.
- People will pay for status.
- People will pay if you make them (once they’re hooked!).
Then, he launched into a list of freemium models.
- Feature-limited: the free version is actually useful, but has some limitation that encourages power users to convert up to a more useful/flexible version.
- Time-limited: really easy to do, but doesn’t encourage commitment since users get cut off after the trial period is over.
- Capacity-limited: think storage services where you get 2GB or so for free and then once they’ve hooked you into storing that much, you upgrade to a higher capacity account.
- Seat-limited: charge on a per user basis. It’s easy to do, but encourages cheating.
- Customer class-limited: easy to do, but hard to enforce. Gave the example of Microsoft’s BizSpark which gives away all of Microsoft’s software free to startups that are writing software, privately held, less than three years old, and generating less than $1M in revenue annually.
Paul Bucheit (Founder of FriendFeed, creator of Gmail)
Bucheit winged things a bit and gave his life story. I was most moved by his advice: “It’s important to do things that make you feel uncomfortable.” Cliché, but I figure some of the most basic truths always seem that way after a while.
Biz Stone & Ev Williams (Founders of Twitter)
True to form, the guys took questions from the audience via Twitter after going on for a few minutes about how Twitter got started, technical issues (it’s a joy to see the Fail Whale a lot less these days!), and things they’ve found to be surprising about Twitter. Biz talked about being surprised about how Twitter influences people’s movements at times, i.e., a guy tweeted about one bar being too crowded at SXSW and that he was going to another bar. Thanks to having tweeted about it, everyone crowded into the bar he was going to.
Mark Zuckerberg (Founder of Facebook)
His session was an interview format with Jessica Livingston rather than prepared remarks. A lot of his session was rehashing how Facebook got started, etc. Zuckerberg dropped a few gems later, though, including:
- “Eventually you get judged not by how things look, but the value you provide to people.”
- “The biggest risk you can take is no risk at all.”
- “Don’t make the mistake of trying to be too perfect.”
- Figure out what users want more of from what they’re already doing on the site.
Mitch Kapor (Designer of Lotus 1-2-3)
Talked about company culture and how startups can be horrible in that regard, i.e., research shows that startups have more public humiliation and bullying than regular companies. Kapor also emphasized the idea of a “Meritocracy vs. a Mirrortocracy.” He thinks that startups often confuse talent with “people like us.” In some respects, that’s a whole ‘nother post, but for another day. Kapor also implored founders to “Walk the walk yourself–mind the gap between stated values and actual practice.” There’s a Wall Street joke in there somewhere…
Tony Hsieh (CEO of Zappos)
Hsieh talked about customer service, company culture, core values, and positive psychology. His talk was different in that he deeply emphasized the soft aspects of running a business instead of the usual pontifications on just profits. On vision, he said: “What you’re thinking, think bigger.” Then, he asked the audience, “What is your goal in life?” and “What would you be happy doing for the next 10 years even if it didn’t make a dime?” On values, he talked about the concept of “committable values,” as in “values that you’re willing to hire and fire people based on.” For Hsieh, at the end of the day, Zappos is not about delivering shoes, but about “delivering happiness.”
Finally, he recommended a few books: Good to Great and Tribal Leadership (the audiobook is available for free from Zappos’ website). Also, Zappos publishes a book about company culture. Gave his email address (ceo at zappos dot com) which you can use to ask for a free copy. Slides from his talk are available here.
Mark Pincus (CEO of Zynga)
Pincus was the last up and gave a talk about being a world-class CEO. Some high points:
- “Who gives a sh-t what your valuation is–only your ego!” This one hit home not because of having to worry about a valuation right now (I struggled for while myself with how valuable I thought anything I’d done might be), but because it reinforced the idea of not doing things for that very reason. CEOs and big heads don’t mix.
- “An internet treasure is something where consumers can’t imagine what life was like before it.” Google and most things they put out come to mind here. Strive to create something of that calibre.
Overall, it was a great event that served as a nice pep-talk en masse. And funniest of all, the peer pressure is building up to move to San Francisco, but we’ll see what happens. 😉
Editor’s Note: Twitter and Y Combinator just announced a partnership for start-ups using the API, they have a similar partnership with Justin.tv, check out the full coverage about the RFS (Request for Start-up’s) and RFS extension over at TechCrunch.