YC Startup Playbook: Ideas & Execution

• This playbook distills advice into a playbook for YC and YC Fellowship companies.

Introduction

• The goal for a startup is to create something users find valuable, which then leads to expanding user base.
• It's more effective to create a product that a small group of users adore rather than one that many users merely like.
• Starting a startup is challenging due to the required workload and intensity.
• Joining an early-stage startup with high growth potential is often a better option than starting your own company.
• A recipe for a successful startup includes a great idea, a strong team, an excellent product, and effective execution.

Part I: The Idea

• YC companies should clearly communicate what they are building and why, since complex ideas may indicate unclear thinking.
• An idea should excite people from the outset.
• Identify who needs the product the most, ideally this would be you or someone you know well.
• If a company has users, determine the growth rate and whether users genuinely love the product and recommend it to others.
• If a company does not have users, figure out the minimum thing to build first to test the hypothesis.
• Ways to test an idea include launching it and observing user behavior or attempting to sell it by getting a letter of intent.
• The letter of intent method works best for enterprise solutions, indicating a customer's commitment to buy the product.
• For biotech and hard tech companies, testing an idea involves talking to potential customers and identifying the smallest technological subset to build first.
• Allow the idea to evolve based on user feedback which is critical to evaluate an idea and build a great product and company.
• Founders and employees should share a sense of mission which drives the startup.
• Businesses should aim to become monopolies, increasing power with scale and being difficult to copy, although acting ethically is important.
• Market size, growth rate, and potential in ten years are important factors.
• Pursue new ideas over derivative ones, with a fundamentally new offering (10x better).
• Be skeptical if there are many companies starting with the same plan, because it likely already exists.
• Doing something new and difficult is easier than something derivative and easy due to people wanting to help and join you.
• Great ideas may initially sound bad but are in fact good.
• Do not be secretive about ideas, as this can help.
• The first reaction to your idea by other people will likely be negative.
• Developing self-belief and resilience is important to counter the haters as you progress.
• It's better to have the idea first and then create the startup to bring that idea to life.
• Founding teams without ideas often struggle and good founders have many ideas already. Also, those with startups already, may have to come up with ideas too rapidly.
• Do not force startup ideas, instead notice problems, inefficiencies, and major technological shifts by working on interesting projects and interacting with smart people.

Part II: A Great Team

• To build great companies you need more than just mediocre teams, especially strong founders.
• Important qualities of a great founder include determination, resourcefulness and being unstoppable.
• The most successful founders are low-stress, capable and effective people.
• Good founders blend firmness with adaptability, so strong beliefs can exist together with willingness to learn.
• The best founders are very responsive, decisive, focused, intense and able to get things done.
• Communication skills are critical for founders, possibly the most important, but rarely discussed.
• Tech startups need at least one technical expert and one sales-oriented cofounder or someone trainable in sales.
• The right cofounder is one of the most important yet often random decisions.
• Choose someone known well for the cofounder, evaluated with substantial data to avoid future regrets.
• Cofounder breakups are common in startups formed solely for that purpose and a leading cause of early startup deaths.
• Having a good cofounder is best, followed by being a solo founder, but having a bad cofounder is the worst.
• Should things not work out, parting ways should be swift.
• Equity splits are better decided early on.
• For two founders, giving one an extra share can prevent deadlocks during fallouts.

Part III: A Great Product

• The most significant factor for success is having a great product. Without one you will eventually fail.
• A great product creates long-term growth due to users loving it and growth hacks stop working at scale.
• A “product improvement engine” should be built talking to users and watching them interact with the product to identify and correct subpar areas and drive company focus.
• Improving the product by 5% weekly can lead to compounding effects.
• The faster product improvement and iteration occurs, the better the company tends to perform.
• Founders should focus on building and engaging with users, limiting other activities.
• Become personally involved with users by observing their habits and practices.
• Founders should interact with users directly, handling sales and customer support.
• It is useful to fully understand the user base and their needs.
• Recruit initial users individually, build based on their feedback, and focus on creating a product that users will tell their friends about.
• Break tasks into smaller pieces and iterate and adapt quickly.
• Early releases should be simple and with limited scope.
• Simplicity is always beneficial.
• For startups facing problems, ask if users use the product more than once, are enthusiastic, if they would be disappointed if product were cancelled, and whether users actively recommend it.
• If the company is B2B, aim for at least 10 paying customers.
• An insufficient product is often the real reason why a company struggles to grow.
• When unsure of strategy, talk to users which often helps but is not always applicable and is only true is people would have wanted horses.
• Founders should care about product quality, with every interaction being included as part of the product.

Part IV: Great Execution

• Turning the product into a great company should entail making money.
• A CEO ensures the company wins and to hire those with complementary skills
• A CEO should focus on setting the vision and strategy, evangelizing the company, hiring and managing the team, raising money and ensuring the company does not run out, and setting the execution quality bar.
• A CEO should engage with the parts of the business they love.
• Being a CEO is an intense job that will take over your life, so work life balance goes out the window.
• A CEO should be responsive, clear about strategy and priorities, present at important events, and execute quickly, especially on decisions blocking others.
• Adopt a “do whatever it takes” mentality, and demonstrate to the team.
• Managing psychology can lead to emotional extremes, and it is important to be somewhat level through them, as being a CEO is lonely.
• It's important for CEOs to have relationships with peers to manage meltdowns.
• Building a successful startup takes a long time and founders should focus on eating, sleeping, exercising, and having relationships.
• Work in a subject you are passionate about for at least ten years
• Be prepared to address problems and reassure the team, while staying optimistic.
• A CEO should not make excuses but find a solution to bad things that happen.
• CEOs who make excuses usually fail.
• First-time founders rarely know what they are doing and should ask for help.
• Mentorship can help you become a better leader, but reading books will not.
• Most advice is common sense, yet first-time founders seek some kind of secret.
• Be direct, willing to ask, and not be a jerk.
• Distort reality for others but not yourself by overstating how well the company is and keeping yourself paranoid.
• Be persistent and figure out the root cause of any problems and address them.
• Persistence is a hard judgement call to make for a startup CEO.
• Have a belief that the future will be much better, and have cultural integrity

Part IV: Execution - GROWTH

• Growth and momentum lead to great execution whilst growth solves problems and the reverse is not true.
• Growth shows you're winning, and people are happy and creates new roles.
• Stagnation demoralizes.
• The prime directive is to never lose momentum and to make it a top priority.
• Optimizing the company around a single agreed upon metric set by the CEO will lead to company-wide agreement.
• Founders of Airbnb created a visual growth chart and posted it everywhere as a constant reminder.
• Facebook established a growth group when growth slowed down which became a prestigious group.
• Maintain a list of factors blocking growth and how to address them.
• When considering actions, prioritize those optimizing growth.
• Internal transparency around metrics and financials is advisable, and a sign of how employees are performing.
• Use true metrics rather than vanity metrics, while retention is equally important as acquisition.
• Momentum includes new features, customers, hires and revenue milestones.
• Set tough but achievable monthly goals and celebrate wins!
• Share strategy and customer feedback internally and the more you share the better things will be.
• In practice crazy growth can unravel things, however seems to happen rarely.
• If you're growing fast but nothing is optimized, simply fix it to get more growth!. Companies that are growing fast, but un-optimized, are undervalued.
• Plan for problems that are ten times greater.
• Implement actions that don't scale, having great customer services for early users, and be less worried about unit economics.

Part IV: Execution – FOCUS & INTENSITY

• The keys to operating are Focus and Intensity and are applicable to all the best Founders.
• Focus relentlessly on product and growth, and say no to things.
• Never start something new before dominating something else and do too few things wrong.
• Prioritize by setting personal tactical priorities.
• Complete big projects intensely fast.
• Don't do everything intensely, rather pick the right things then find ways to get 90% of the value with 10% of the effort.
• The market only cares about how hard you work!
• Obsess about product quality, but move fast, as this is one of the signals of a great founder.
• A slow-moving founder will never be successful and manage to balance product and customer needs.
• Always stay focused and drive forward.
• As soon as something is working, keep going with it and don't take you foot off the gas.
• Instead of networking and speaking to lots of panels you chose to keep focusing on your output, than your personal brand.

Part IV: Execution – JOBS OF THE CEO

• The CEO should be making sure the company wins.
• A CEO should set the vision and strategy, evangelize, hire and manage, raise money, and set the quality bar.
• Find what components of the business you appreciate, and stay engaged in them.
• Being the CEO is an intense way of life.
• Always be ready to make every decision no matter how good your delegation is.
• Always act in the best interests of the company and outside world.
• Make important decisions quickly.
• You should adopt a “do whatever it takes” attitude and bring the members of your team with you.
• Manage your psychology, as it is going to be hard.
• Understand the level of emotional highs and lows you will experience.
• Have other leaders you can consult so you do not get overwhelmed.
• Know the team will be there for the long haul and know when to eat, sleep, exercise, and see your friends.
• Maintain an open mind but know everything has been broken.
• Always reassure the team things are ok.
• Lots of bad and unfair things will happen. Do not make excuses for your failure, instead find opportunities for success.
• Know what things to let go of. It is better to be ok with some failure.
• Let the injustice upset you for a maximum of a minute! Focus on finding a solution.
• First time leaders can be hard, so listen to more experienced leaders. Find a mentor.
• Be direct in asking for help.
• Bend reality for others, but no yourself. Understand the startup will change.
• Create paranoia around the startup.
• Be persistent and do not give up due to issues big or small.
• Always be optimistic a startup will not live in the business as a whole.

Part IV: Execution – HIRING & MANAGING

• Hiring is one of the most important jobs and the key to building a company.
• The most successful companies wait a long time until hiring for employees.
• Adding organizational complexity increases costs.
• The first advice about hiring is to not do it since great people always want to join great rocketships.
• It is important to hire the right people to build a great company.
• Hiring needs to be balanced with generosity, equity, trust, and responsibly.

Part IV: Execution – COMPETITORS

• First-time founders tend to think it is other companies that break startups.
• Ninety-nine percent of what kills startup is suicide.
• You likely will fail for not creating a good product.
• Forget about the external problems and worry about the internal struggles.
• Spend ninety-nine percent on internal issues, and one percent on competition. Focus on growing your business.
• Ignore the competitors and work on your offering.

Part IV: Execution – MAKING MONEY

• Get people to pay you more than it cost to deliver the good/service and do not forget this!
• Do not plan to buy users to grow your product. Focus on making the offering viral.
• If you have a paid product with less than $1000 lifetime value, generally you cannot effort sales. Experiment!
• In the end it is always good to read Hacking sales to know what works.

Part IV: Execution – FUNDRAISING

• Every start-up will one day raise funds.
• Be careful not to throw away money without it being a problem. Have less money when it is good.
• The most important part of fundraising is to come up with a good company that increases with outside capital.
• Most investor returns are driven from great success by investors, and investors fear losing money.

Closing Thought

• Remember that thousands will have every great idea.
• Execution wins out due to its intense grinding. So all you need is a great idea, a great team, a great product, and great execution. So easy!

Appendix 1: Projects and Companies

• People get offended if you refer to their company as a project.
• It is much better to think of your company as a project.
• Companies sound more serious.
• As a project it has a lower exception and fewer people.
• Do not be afraid of having crazy ideas if it is just a project.

Appendix 2: How to hire

• After a startup raises lots of money they need to hire.
• A Founder should spend roughly 25% of his time hiring.
• There is no way to delude yourself into how good you are, and a Founder needs a good support network.
• Startups should spend the time and get hands dirty and learn a role, so they know what to do when hiring.
• Work to source candidates and try to work with people.

Appendix 3: Unit Economics

• A joke with unit economics comes with the analogy, “we loose a little money on very customer, but we make it up on volume.”
• The issue requires retention on orders for a certain revenue.
• There is a massive reduction on acquiring users, as it is too expensive.
• Unit economics has issues when they do not pass the Peter Theil monopoly test.
• Know the margins on great companies.

Appendix 4: Default Alive or Default Dead?

• With a company operating between 8-9 months should know how to grow revenue.
• Is revenue being generated. If not, the Founders need to know it.
• Be able to explain to investors what you are trying to accomplish.
• Hire less people and do not overhire based on an influx of cash.