Startup Archive

Cruise founder Kyle Vogt’s framework for choosing a startup idea After cofounding Twitch and selling the company to Amazon for $1 billion in 2014, Kyle was trying to figure out what to do next: “Twitch was and is today pretty successful but the result was entertainment mostly… That was a good thing. It felt good to entertain people, but… I realized I wanted something that scratched more of an existential itch.” Twitch took eight years to become successful, so one of Kyle’s core requirements for his next idea was that he had to be willing to commit at least 10 years to it. As he explains, “When you think about things from that perspective, you certainly raise the bar for what you choose to work on.” Ultimately Kyle came up with three requirements for his next company: 1. Interesting technology. “It had to be something where the technology itself determines the success of the product. Like hard, really juicy technology problems, because that’s what motivates me.” 2. Impactful. “It had to have a direct and positive impact on society in some way. So an example would be healthcare or self-driving cars because they save lives… There’s a clear connection to somehow improving other people’s lives.” 3. Large scale. “It had to be a big business because for the positive impact to matter, it’s got to be a large scale.” After thinking on it more and experimenting with various side projects, he ultimately decided self driving cars was what he wanted to work on: “I just took the plunge right then and there and said, this is something I know I can commit 10 years to. It’s probably the greatest applied AI problem of our generation. And if it works, it’s going to be both a huge business and probably the most positive impact I can possibly have on the world.” General Motors acquired Cruise for more than $1 billion two years later, but Kyle continued to work on self-driving as CEO of Cruise through November 2023. So his 10-year forecast actually proved quite accurate. Sam Altman gives similar advice in his blog post “Startup Advice”: “In general, don’t start a startup you’re not willing to work on for ten years.” Video source: Lex Fridman (2019)

Elon Musk on the first thing to do when starting a company “The goal with Tesla was really to try to show what electric cars can do because people had the wrong impression. We had to change people’s perception of an electric vehicle because they used to think of it as something that was slow and ugly with low range, kind of like a golf cart. That’s why we created the Tesla Roadster — to show that it can be fast, attractive, and long range… Until you actually have the physical object and they can drive it, it doesn’t really sink in for people.” Elon believe this principle is something all startup founders should take note of: “If you’re going to create a company, the first thing you should try to do is create a working prototype. Everything looks great on PowerPoint… But if you have an actual demonstration — even if it’s in primitive form — that’s much more effective for convincing people.”

Max Levchin on how Peter Thiel reacted to losing his entire investment in his co-founder’s startup When assembling the found team for PayPal, Max Levchin wanted to recruit Luke Nosek. But he was worried at how Peter Thiel would react given that Peter lost his entire investment in Luke’s failed startup SmartCal: “I was certain that Luke and Peter would not get along because Luke had just lost all the money Peter invested in his startup… I never had investors up until this point, so I was really not familiar with the relationship you have.” With trepidation Max told Peter that Luke was really bright and worth trying to work with again. And he was surprised at Peter’s response: “Oh of course. I should’ve thought of that myself.” So you’re not mad it him? Max asked. “No, he’s brilliant.” Then Peter recruited Luke while Max recruited the rest of the PayPal founding team. After PayPal, Luke went on to work at Peter Thiel’s venture firm, Founders Fund. I think this is an important lesson on failure. Statistically, the vast majority of startups fail, and the best investors know how hard it is to build something brand new and innovative. Very few people succeed on the first go-around, and it’s not necessarily a reflection on you if your startup fails. Obviously you don’t want to fail, but as Vinod Khosla puts it: “to do something exceptional, you have to be willing to fail.” Video source: This Week in Startups (2018)

Peter Thiel on how to think about the future “What you end up doing when you think of the future as indefinite is you pick a job that will be good on your resume because it will then lead to a different job later on.” Instead of viewing the future as indefinite, Thiel suggests that the students in the audience think of the future on three horizons: short term, medium term, and long term. And he defines them as follows: 1. Short term = Are you going to be happy and will you be learning a lot? 2. Medium term = How good is it on your resume? 3. Long term = Are you working on something important or meaningful? “I think we are in a skewed world where we overweight the medium term, and we underweight some combination of the short term and the long term.” Thiel recommends recalibrating it to: “Focus on some combination of short term and long term. And forget about the medium term.”

Basecamp founder Jason Fried: Customers don’t care about your features and technology Jason recounts how when he was selling shoes growing up in Illinois, representatives of the major shoe brands would arm salespeople with facts about all of the fancy new technology (e.g. the difference between the Nike Air versus the Zoom Air, the Goodyear rubber outsole and the midsole, etc.). However, when Jason told customers about these technologies, they didn’t care. When you actually watched customers buy shoes, they really only cared about a few key things: What does it look like? Is it comfortable? Can I afford it? Jason saw the same thing selling tennis rackets. He’d tell customers about all the latest technology and the difference between graphite versus fiberglass or natural gut string versus synthetic. Nobody cared. They’d look at a tennis racket and ask him if it came in other colors. Jason has observed the same pattern across website and software: “Companies are obsessed with features and the technologies because that’s what they do all day. But they don’t actually watch people buy stuff. When you watch people buy stuff, they just want the simple stuff. They want the stuff that solves their problems and just works. They like the way it looks. They like the way it feels. It’s comfortable. It’s affordable. That’s what people want…. Yet companies keep talking about the specs, the technology, and the features.” Jason advises founders to really listen to what your customers are saying and watch how they buy your product: “You’ll find out that they just need a few things done really, really well. And that is really, I think, the secret to all this stuff. It’s figuring out the basics. Nailing the basics.”

Scale AI CEO Alexandr Wang explains his “MEI” hiring policy In June of 2024, Alexandr announced a new hiring policy called MEI, which stands for merit, excellence, and intelligence. “The basic idea is in every role we’re going to hire the best possible person, regardless of their demographics. And we’re not going to do any sort of quota-based optimization of our workforce to meet certain demographic targets.” He continues: “That doesn’t mean we don’t care about diversity. We actually care about having diverse pipelines and diverse top-of-funnel for all of our roles. But at the end of the day, the best, most capable person for every job is going to be the one that we hire.” Alexandr acknowledges that this was mildly controversial, and there are legitimate questions about how much social responsibility companies should bear. But overall his philosophy seems to echo the ideas popularized by Coinbase founder Brian Armstrong of building a “mission-focused company.” Brian put it this way in a 2020 blog post: “It has become common for Silicon Valley companies to engage in a wide variety of social activism, even those unrelated to what the company does, and there are certainly employees who really want this in the company they work for. So why have we decided to take a different approach? The reason is that while I think these efforts are well intentioned, they have the potential to destroy a lot of value at most companies, both by being a distraction, and by creating internal division. […] Even if we all agree that something is a problem, we may not agree on how to actually go solve it […] Change happens in the world only when a smart, talented, group of people come together to focus on a hard problem for a decade or more. Many companies never stand the test of time, because they decide to dabble in unrelated efforts, and distract and divide their workforce in the process. Paradoxically, by being laser focused on our mission, we will likely have an even greater impact on the world, through our products and growing customer base.” Video source: Andreessen Horowitz (2024)

Stack Overflow founder Joel Spolsky on why you should make your product free After the dot com crash, Joel read a blog post by Ev Williams titled “The End of Free.” As Joel explains, the blog post argued that software was no longer going to be free: “He was like: ‘I would rather have a company with 400 customers paying me $10 a month so that I can eat stuff than 400,000 customers that don’t pay me anything and I can’t eat stuff.’… That was very influential at the time, and we were like: ‘Yeah! We’re always going to charge for all the things.’” At the time Joel was building a remote tech support product called Copilot: “We were very much of this ‘end of free’ mentality. So we were like: ‘And it’s 5 bucks! That’s a good price for helping somebody fix their computer’.” But Joel believes this was a fatal mistake: “What we should have done is made it free and then figured out how to pay for it later, which would have been to go to professional tech support departments and sell them the advanced version that lets them run a team of 1,000 tech support people… And sell it to them for a million dollars. But get the marketing from the free product.” He did not make the same mistake when he founded Trello (acquired for $425M): “I think in 2000 I would’ve made that mistake again. I would’ve been like ‘Hey it’s software like Microsoft Word. It’s $20 a month or whatever.’ But what we said was we want a hundred million people to eventually use Trello, of whom the 1% that gets the most value out of it pays us $100 a year. Then it’s a $100M business and it’s worth $1 billion and we’re done.” As Joel explains: “99% of the people are just going to get it for free, but when you focus on the 1% that find it most useful, they will pay you. They will pay for added features and they will pay you anything you want because they’re making money off of it.” He gives an example of Deutsche Bank making a billion dollars a day selling derivatives - they would pay almost anything for Microsoft Excel because it’s essential to that massive business. Video source: This Week in Startups (2019)

David Sacks on what made the PayPal Mafia so successful The employees of PayPal went on to build many of the companies that defined Silicon Valley in the 2000s, such as Tesla, SpaceX, LinkedIn, YouTube, Palantir, Yelp, Yammer, and more. David Sacks—founding COO and product leader at PayPal—reflects on some of the factors that he believed contributed to their success: “I think one of the key things was that PayPal innovated not just on product, but on distribution as well.” He gives three examples of distribution strategies the PayPal Mafia brought with them to their next companies: 1. Virality. PayPal paid users $20 to refer their friends, which led to explosive growth. Virality was a huge factor in LinkedIn’s success. 2. Building on an existing network/platform. PayPal leveraged eBay’s power seller network, while LinkedIn leveraged their users’ network of email contacts. You want to “go where the users already are,” Sacks argues. 3. Embeds. PayPal let customers embed the logo on their websites and eBay auctions. YouTube employed this same strategy by making their videos easy to embed on Myspace and other websites. Sacks continues: “All of these techniques today are commonplace, but in the early 2000s, we were one of the first companies to do them… We were innovating not just on product but on distribution as well, and that is something that all of the PayPal Mafia companies have done.” He contrasts the ~220 employees pre-IPO PayPal employees producing 7+ unicorns versus only a handful from Google even though Google had 100x the number of employees. “It’s a really interesting question: Why?… I think this sort of scrappiness around distribution is a big part of the explanation… If you’re an entrepreneur working in a small team, you’ve got to figure out from zero: How do I get my first user? How do I get the second user? How does that go to one hundred, one thousand, one million?… [Google] never has to think about that. They’ve got guaranteed distribution of half a billion users. And so, I think that scrappiness around distribution is one of the key reasons that there’s been so many PayPal mafia companies. I think it’s an interesting thing to think about as you create your own startups.” Video source: Draper University (2014)

Instagram founder Kevin Systrom: “most successful things are pivots” Tim Ferriss observes: “In some aspects, there’s a fetishizing of perseverance… And yet, if you look at a lot of the largest public successes, many of them had some type of pivot or shutting down of something that wasn’t working.” He asks Kevin—who famously pivoted a failed check-in app into Instagram—how do you know when it’s the right time to stop? Kevin posits that most successful companies are pivots. He points out that YouTube started out as a dating site. And there are plenty of other examples. Slack started out as a gaming company called Tiny Speck. Twitter started out as a podcasting app called Odeo. Twitch started out as JustinTV, oblivious to gaming streamers. The Discord founding team's first product was Fates Forever, a MOBA game on mobile platforms that failed. Kevin suggests that most first products fail because it's really hard to tell what's going to work before you put it in people's hands. He argues: "The key to entrepreneurship is failing really quickly: putting it out there, seeing if it works. If it doesn't, diagnosing why. And then focusing on how to improve it from there... Most of the time you get it wrong. So the question is: knowing you're going to get it wrong, how equipped are you to deal with that failure really quickly before you run out of money?" He continues: "The entrepreneurs that I've seen do really well are the ones that are equipped and engaged on the change from something that's not working to something that is. Far too many people--because of ego or whatever--stick with ideas for far too long, and it ends up going really poorly." Video source: Tim Ferriss (2019)

Jony Ive: "I believe we sense when there's care taken with a product” In the clip below, Jony shares that one of the things he has come to feel really strongly is that customers can sense when care has been taken with a product: “I can’t articulate why, but I believe we sense when there’s been care taken with a product. Just in the same way we sense carelessness.” Jony believes that most of our manufactured environment today sadly testifies to a degree of carelessness: “It testifies to: get it built fast, make it cheap, make it look different. There’s just that sort of carelessness. And I just think it’s one of the things that we can strive to do for humanity, and it’s a way that we can serve: is to take care.” This philosophy may have been instilled by Steve Jobs. In Walter Isaacson’s biography of Jobs, there’s a story of the time Jobs insisted that every element of the Macintosh computer be beautiful—down to the circuit boards inside: “Look at the memory chips. That’s ugly. The lines are too close together.” When the computer was finally perfected, Jobs had the engineers’ names engraved inside each one. “Real artists sign their work,” he told them. Isaacson comments: “No one would ever see them, but the members of the team knew that their signatures were inside, just as they knew that the circuit board was laid out as elegantly as possible.” Video source: Vanity Fair (2014)