Y Combinator Startup School: Week 4 Takeaways
Continuous launches, unscalable things, founder tenacity, and more. Plus, the best lecture in the entire Startup School series...
Y Combinator is a company that invests in and mentors early stage startups.
They also offer Startup School, an enlightening 10-week online course that teaches Y Combinator’s secret recipe to building rapidly-growing startups. It covers topics like general entrepreneurship, creating a Minimum Viable Product, getting customer feedback, marketing your venture, and much more.
In an attempt to take my own startup to the next level, I’ve enrolled in Startup School, and I’m sharing my insights and key takeaways with my readers.
In case you missed it, check out my highlights from Week 3 here!
Lecture 7: How to Launch (Again and Again)
Everybody pictures their launch as a groundbreaking, news-making event. Streamers, champagne, a giant stock ticker going up and up, counting sales numbers until the machine explodes.
But in reality, we take the idea of the "big launch" too seriously. You should be so focused on immediate growth that there's no time for dreams of some extravagant launch event.
Here are my takeaways from Kat Mañalac's thought-provoking lecture:
1.) Launching is not special — it's something you can continually do
Again, startup founders should avoid thinking of a launch as one perfectly planned moment in time. Launching is actually a continuous process — you can "launch" again and again, every time you introduce new products, features, etc.
This relates to Lecture 3: How to Plan an MVP, where YC partner Michael Seibel points out that no one remembers the launch of gargantuan companies like Amazon, Facebook, YouTube, etc. No one remembers the early days, but if you create something people love and get it in front of the right customers, people will have no problem remembering you.
2.) Why launch continuously?
Continuously launching allows you to test different versions of your pitch and product with different audiences.
Repeated launching will also help you determine whether you're talking to the right users via the right channels.
3.) Social media / blog launches
It's easy to think that getting a shout-out from the right influencer or a feature in a big blog will hockey stick your growth curve. But a lot of blogs and influencers are "pay to play," i.e. you pay them to promote your new product or startup, and the prices are often outrageous. The subject matter experts at Y Combinator insist you should not be spending money on this type of promotion early on.
You need to get creative, doing unscalable things to grow and find product-market fit. If you make something your audience truly loves, they'll promote it on their own.
This leads nicely to the next lecture, which, in my opinion, is the single best lecture in the whole series....
Lecture 8: Growth for Startups
Gustaf Alströmer started as AirBnB's growth lead in November 2012 and spearheaded their international expansion. He hopped to YC in June 2017 and provides some of the most useful content in the Startup School Program. He isn't what you'd expect from a former C-suite marketer. Instead of being the prototypical, charasmatic sales guy, he has the laid-back, analytical style of a hacker, and gives the impression of knowing just about everything there is to know about startup growth. (The difference in personality type is mirrored in the difference between startup marketing philosophy and traditional marketing — probably not a coincidence.)
Given the topic, his lecture could have been 10+ hours long, and even my notes ran on for pages. For brevity's sake I'll share the 4 key ideas of his talk, but would recommend checking out the full lecture here:
4.) "Startups take off because founders make them take off"
AirBnB spent a year trying and failing to get off the ground. Paul Graham made the founders go to New York City and meet with hosts directly, discussing the challenges they're having with the product, what's working, how they use it, etc. They learned things they never could learn sitting behind a computer, and at minimal cost. That's how you hack marketing, using effort and elbow grease to disrupt the traditional dollars-for-eyes mentality.
It's worth noting that many successful founders usually start off developing the skills, grit, work ethic, and disruptive strategies that help fuel their eventual success. For example, Nick Woodman, the founder of GoPro, bought shell necklaces in Bali with his wife for $1.90 and sold them for $60 each along the California cost. Marketing pro Gary Vaynerchuk often references his early "venture" of flipping baseball cards. Famed ad-man David Ogilvy cut his teeth selling AGA cooking stoves to housewives in Scotland. Mark Cuban used to sell garbage bags door to door (I shit you not).
I love this idea. You don't start behind a computer, with a website and some Google ads, casting your line into dark waters and expecting to hit a million in revenue. Ventures succeed because founders have the tenacity, ambition, and creativity to make them succeed.
5.) Unscalable things
To make a startup grow, you gotta do what you gotta do. Do unconventional things. Things that don't feel right. Things they don't teach in business school. Things that might not be profitable. Whatever you have to do to get those first few customers.
This is the magic of unscalable things. The things that help make your startup take off. Paul Graham has one of the all-time best posts on the subject, and the idea has since been universalized.
These actions are called "un-scalable" because they're fundamentally unsustainable. They won't get you to the millionth customer, but they can help get you to the hundredth... and arguably the first hundred are more valuable.
There is no silver bullet here — every product and company has to discover what unscalable means for them, and what works for their users. But they tend to be incredibly manual processes, where the size and scale of a fledgling company actually becomes a strength, allowing them to give their time, versatility, creativity, and attention to problems that established competitors won't touch. As Paul Graham explains:
"The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all startups have to. You can't wait for users to come to you. You have to go out and get them."
This topic could be a post (or book) in itself, so we'll cut it there — just remember that, as we learned last week, startup success begins with the uncomfortable, unconventional, unscalable — but valuable — things.
6.) Product-Market Fit (PMF)
In YC (and most of the startup world), Product-Market Fit (PMF) has an almost mythical air to it. It means you've created a product that customers love, which is one of the foundations of YC's startup philosophy. But it's slippery to define or pinpoint when you've achieved it, and experienced entrepreneurs tend to settle for the explanation 'you know it when you see it.'
Alströmer, however, points to customer retention as the single best indicator of PMF. If you're not able to retain users or keep customers coming back for more, you'll always be grinding for every conversion. You'll be stuck doing unscalable things for every customer. It will never lead to the viral, exponential growth that defines a successful startup (startup = growth, remember?).
Importantly, you have to understand what version of customer retention is relevant to your company. For example, if you're a payroll company, you want to ensure your bi-weekly use per customer stays flat or grows. Instagram might look at daily use, whereas Google might track number of uses per day. And for physical products, the variance can be huge — surely Ferrari has a different retention timeline than Chubbies. They key is to use an honest data point, because you’re not doing your startup any favors by tracking vanity metrics.
You need to do unscalable things to achieve your first set of customers. These customers give you feedback, and if they like the product, return to use it again or purchase more. Achieving a demonstrable level of PMF means you have a product that your target market loves, and a stable base of initial customers that aren't going anywhere. The next step is fueling and optimizing for growth.
7.) Growth, Step 2: Conversion Rate Optimization
When you're doing things that don't scale and acquiring attention and customers, you've only checked one box. Another way to grow users and revenues is Conversion Rate Optimization (CRO). This is where copywriters, designers, product managers, data scientists, and more provide value by improving the number or % of users that move along your sales funnel.
For example, a copywriter will raise your % of conversions by improving the copy of your landing pages, product descriptions, calls to action, closes, and more. Similarly a designer will encourage people to move along your funnel by improving the flow and aesthetic appeal of your website. A pro will always take the guess-work out of the equation, and leverage A/B or split testing to identify what works best.
But it bears repeating — as we've explored, Product-Market fit is integral to the success of a startup, and without it, no amount of split testing, CRO, or unscalable things can save you.
Those are my key takeaways from a heavy-hitting Week 4! This was possibly the most valuable week so far content-wise and I hope this info helps you as much as it helps me!
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