Book of the Week: Founders at Work
23 Aug 2016
This week I read Founders at Work: Stories of Startup’s Early Days by Jessica Livingston, founding partner of Y Combinator. I had no idea what the book was about. When I opened it up, I thought this is just a bunch of interviews, which could possibly suck. The book is actually great and I learned a lot reading this book. The book came out in 2008, so they had an interview with some guy called Evan Williams who sold Blogger to Google after running out of money and having everyone quit before having a chance to lay everyone off. You get to hear the up and down journeys of well known companies. I gave up on startups early this year, so this was a nice chance to live vicariously. Learnings Some people like to rewrite history. Turns out that Jack thought up the idea to put the Hotmail tagline on each email, not Tim Draper. I need to remember to mention it to Sabeer, the next time I see him in the restroom. Frugality is a saving grace. Steve Wozinak was good, because he didn’t have money, so he spent a lot of time trying to reduce chips and design things on paper. Being frugal is very helpful as a startup founder. It lets you survive like a cockroach. Persistence is another theme. When people say “no”, it is just the start of the negotiation. Hiring good people is important. Y Combinator does not invest in good teams without good ideas. They tried it, but have learned not to do it without a good idea. I think it works, but it doesn’t work if you only have a 3 month time frame to get things done. Investing in good teams works if given enough time. It doesn’t matter what the business plan you used to raise money, you should build what the customers value and are willing to pay for. Most ideas change and don’t survive first contact with the customer. One of the best uses of money was to buy a $15,000 espresso machine. It turned around the company, because it changed the environment. Dealing with customers is a lot about managing feelings. You want everyone to feel great using your product. Actually, people are all about feelings. They are just squishy meatbags of feelings.
The biggest roadblock to the entrepreneur are liabilities in your life. —James Hong, Cofounder of HOT or NOT
Adobe Systems was started by people in their early 40s. It is never too late to start a company. Just make sure you can take care of your liabilities. When you’re young, you don’t have any liabilities. That is why it is easier. I think Elon was right. Starting a company is like eating glass. Shouldn’t do it unless you can commit your life to it. I don’t know why anyone would want to eat glass. Venture Capitalist
After the meeting, the VC spoke to someone associated with our company and said to him, “Tell Steward not to bring his wife to VC meetings.” Which was shocking to me, and Stewart was furious about this as well. He let everyone know, “Caterina is not ‘my wife’. She is instrumental to the success of this company. Her contributions have been equal to mine.” - Caterina Fake, Cofounder of Flickr
Who knew that VC were sexist? I got a very general sense that venture capitalist aren’t really that great. You’re probably lucky if you get one that is net neutral, doesn’t hurt or help the company. A lot of these founders were screwed by their venture capitalist. I would definitely make sure I had a great lawyer. Great lawyers are worth every billing increment. Every entrepreneur should have great relationships with their lawyer. You’ll be giving them money, so you don’t lose your shirt. Startup founders like to attract lawsuits of all kinds. Being sued is normal. Unpleasant, but unfortunately normal.
They’d ask me, “Why aren’t we doing an IPO?” And I’d say, “Because we have profits.” —Philip Greenspun, Cofounder of ArsDigita
Raising money is not really something you want to do if you can avoid it. You only do it to increase your growth. People don’t do enough due diligence on things. Once you get a term sheet, then everyone will be calling you, wanting to invest. VCs are sheep and susceptible to FoMO. Should definitely read Venture Deals by Brad Feld if you’re raising. Programmers
People don’t like to write. It’s hard. The people who were really good software engineers were usually great writers; they had tremendous ability to organize their thoughts and communicate. The people who were sort of average-quality programmers and had trouble thinking about the larger picture were the ones who couldn’t write. —Philip Greenspun, Cofounder of ArsDigita
A lot of the book is based on software startups since the internet made a lot of these companies successful. Apple also had a surprising amount of software that Woz had to write and figure out out. Having a skilled engineering team was a definite asset to these companies.
Managing programmers is tough. That’s the one reason I don’t miss IT, because programmers are very unlikeable people. They’re not pleasant to manage. In aviation, for example, people who greatly overestimate their level of skill are all dead. —Philip Greenspun, Cofounder of ArsDigita
In 2008, you could get a MIT grad and give them $60 an hour and bill $200 to $250 an hour for building a database-backed website. If you start a consultant firm, you can make quite a bit of money on the difference. That’s what two of the people in the book did. You can probably charge even more than $250 an hour now if you account for inflation. The ability to write software is not valuable. The ability to solve a business problem is valuable. I think there is a big difference between people who write software and those who create companies by solving problems with software. It requires thinking about how you can provide value to the customer rather than how you can solve this technical problem. The technical problems just come with the territory.