Sam Altman's Startup Advice (Part 2)
Part 2 of my own personal notes / summaries of the readings available on Sam Altman's 'How to Start a Startup' lectures.
Let’s continue on with exploring the recommended readings / material available in Sam Altman’s how to start a startup notes available here.
You can find part 1 of this series below.
#28: The Happiness Culture: Zappos isn’t a Company -- it’s a Mission (by Fast Company):
Article focuses of Tony Hsieh – the founder of Zappos.
Hsieh noticed that a lot of other entrepreneurs usually do all sorts of crazy things. They also tend to try a lot of different things at a pretty young age.
He thought of failure as being part of the path to success: “I think entrepreneurs view the failures as getting one step closer to the success. As opposed to oh, like I’m a failure.”
A key part of Zappos success lies in their culture and their obsession with making customers happy.
When hiring, they pay special attention to their 10 core values:
Deliver Wow Through Service
Embrace and Drive Change
Create Fun and a Little Weirdness
Be Adventurous, Creative and Open-Minded
Pursue Growth and Learning
Build Open and Honest Relationships with Communication
Build a Positive Team and Family Spirit
Do More with Less
Be Passionate and Determined
Be Humble
Zappos has a 4-week training program for everyone. No matter what the role, all employees were asked to spend 2 weeks on the phone with customers.
They don’t (or didn’t) tolerate employees who strayed from their culture: any employees that didn’t fit in were paid to leave.
Zappos really struggled during the dot-com bust: had trouble with getting enough cash-flow and almost went bankrupt, but persevered.
Wanted employees to be who they are and to not be scared of sharing who they really were. The idea is that people who are themselves at work aren’t scared of sharing new ideas and being creative.
Research shows that best companies over the long-term are ones that can combine profits, passion and purpose. Hsieh’s focus was on delivering happiness, not just to Zappos employees but to investors and customers as well.
#29: Don’t Fuck Up the Culture (by Brian Chesky):
Brian Chesky (the founder of AirBnb) asked Peter Thiel in 2012 what the single most important piece of advice was for him and has answer was: “Don’t fuck up the culture.”
Culture is simply a shared way of doing something with passion.
The culture is the foundation of a company.
If you break the culture, you break the machine that makes your product.
How do you build a culture? By upholding your core values in everything you do. When you hire, when you write an email, when you’re working on something – it must all be rooted in your culture.
Why this is important: when you have a strong culture, you don’t have to rely on process. You can trust your team to do the right thing.
Problems come and go but culture is forever and something that you’ll be remembered for.
#30: What’s It Like to Work for Stripe (by Alex Maccaw):
Stripe has a culture based on transparency and communication.
E-mails are sent to either the whole company or a team: this fosters inclusion and communication. Everyone knows what’s going on and everyone is attached and encouraged to give input. Other companies preach fearless communication. Stripe practices it.
Once a week they have an all-hands meeting where each team explains what happened during the week prior and at the end of the meeting. They discuss FUD (fear, uncertainty and doubt). This prevents problems from being hidden and encourages everyone to think about them and try to solve them.
Meetings are expensive, so they try to limit them (weekly meeting is the only mandatory meeting they have).
They all have lunch together once a day. They also have social events together (like going to the theater) and they have company hackathons twice a year where they all go away on a trip and work on new Stripe-related projects.
Every single engineer does support on a bi-weekly rotation. Even the founders take part in it. This is one of the best ways to learn about the company and customers.
They use chat often and communicate asynchronously to prevent interruptions. Also employees are prompted to post what they’re working on every few hours in the chat (keeps communication channels open).
Once a week – one team takes a technical paper and discusses it over lunch.
Employees are asked to describe their ‘dream machine’ and find that it’s waiting for them on their first day of work (i.e. give your employees the right tools to do their jobs).
During the first few days, new employees are asked to work with different engineering groups (great way to get familiar with everyone in the company and what they do).
Organization is very flat: they don’t have managers / hierarchy and focus on hiring great people. People are also encouraged to be generalists and to not be afraid of exploring different domains.
#31: How to Hire (by Sam Altman):
After raising money, the next biggest problems startups face is hiring. Hiring is really hard and really important. In fact, it’s most likely the most important thing a founder does.
If you don’t hire very well, you will not be successful. Companies are a product of the team and founders who build them.
Some advice on hiring:
Spend more time doing it: most founders should spend between one third to one half their time hiring. Greatest companies always have great people. You can’t outsource this either.
Get your hands dirty: hiring for a sales role? Spend some time doing it / understanding it and then hire.
Look for smart, effective people. Ask them what they’ve done during the last month or what their average day looks like – as well as check their references. You want smart people that get things done.
Have people do a ‘work sample test.’ Instead of hiring them right away, pay them to do the work you’re hiring them to do for 1-2 days to see how they perform.
Sourcing candidates: focus on using your personal networks more. Look for friends and friends of friends. Often to get great people, you have to poach. Also, use your investors and their network to find candidates.
You need a mission in order to hire good people. The candidates you hire need to believe in the mission.
Hire people that you like (would you be willing to spend a Sunday working with them all day if you had to do so)?
Have a set of cultural values you hire for. Make sure everyone in your company knows what they are and believes in them. “Values are a decision making framework that empower individuals to make the decision that you, the founder, would make, in situations where there are conflicting interests (e.g. growth vs. customer satisfaction)”. - Andrew Mason
Don’t compromise. Only hire great people that fit your culture. A bad hire can ruin a company. Great people attract other great people. Getting someone mediocre can kill this phenomenon.
Be generous with compensation – especially when it comes to giving equity. You should give out below or fair market salaries with equity (ownership) of the company to great people and they should be happy to take it.
Trust your gut and always be on the lookout for new hires.
Fire fast: many founders don’t fire fast enough. If the person doesn’t fit, it’s better to let go of them sooner than waiting.
After you hire people, you need to keep them. Remember to check in with people, be a good manager, have regular all hands meetings, make sure people are happy and challenged, etc. Always keep a sense of momentum at your company. Give people new roles every six months or so.
Always be identifying and promoting new talent.
#33: Robert Cialdini’s six principles of influence:
Get familiar with these 6 principles which are:
Reciprocity (the practice of exchanging things with others for mutual benefit).
Commitment and consistency (feeling the need to be consistent in our beliefs).
Social proof (when people are uncertain, they'll look to others for behavioral guidance).
Authority (people follow the lead of credible, knowledgeable experts).
Liking (people prefer to work with and support those that they like).
Scarcity (the rarer or more difficult the products are perceived to be, the more valuable they are).
#34: Marc Andreessen on the Future of Enterprise (Interview from 2013):
This is a really good interview with Marc Andreessen that discusses a few topics primarily dealing with the adoption of technology / software and how it’s going to change the world.
Talks about how the world goes in cycles: 2001 internet bust brought about extreme pessimism for technology / online businesses, but many turned out to be wrong in their assessment. Businesses are never easy to run, but investors seem to be attracted in finding ‘easy’ businesses; but then they find out that running them isn’t so easy and they flock to different industries / segments at different times. The only ‘easy’ business might be Google and that’s a very rare exception - most businesses are hard to establish and run.
Some predictions for the future?
A lot of industries prior to the internet boom had a lot of gate-keeping: unless you were a large company, you had limited resources and you couldn’t compete. Today, this is different, and being small is almost an advantage to being large. Predicts that small companies will become more predominant.
CAPEX to OPEX: before, you had to buy equipment and servers etc.. to run a business, but these days everyone can just rent (i.e. use Amazon / cloud computing). This enables lower barriers to entry for companies and the need to budget less (in the short term anyways).
A lot more enterprise companies are going to use SaaS going forward.
Next companies he believes will bring a great return? Companies which offer outsourced work (like TaskRabbit and Zaarly). He’s also big on enterprise education (many companies can’t find qualified employees so he thinks online education is the solution).
Big technology markets actually tend to be winner take all. Winners in technology tend to have 90 percent market share. In normal markets though (like Pepsi and Coke) it works very differently (Coke had only ~10% of the total market at the time).
Since this is the case, many competitors or companies in tech space tend to be over-founded and go bust after a period of time. The same will happen in VC space: it will have a few winners which take the whole market while many other competitors will lose.
Market is cyclical and investors tend to act in waves: Once capital starts flowing in a rotation, all capital leaves one sector and goes into another one (raising stock prices) and everyone follows due to rising prices and wanting to make money. Down cycle is similar. A smart investor ignores these waves and simply invests in good entrepreneurs.
Like entrepreneurs with vision, knowledge and persistence and who say: “I have this really good idea and I know it’s a good idea for the following eight reasons, and I have thought about it and I have worked in the field, and I know what I am doing, and I have talked to the customers and I have figured it out, and I am going to do it. I am just going to flat-out do it. And I am going to do it whether you fund me or whether you don’t fund me or I don’t get funded. I am still going to do it.”
#35 - #38: Mostly Generic Articles and Slides from Reid Hoffman
A lot of these were either generic advice / book pitches by Reid Hoffman (one of which being that employee / employer relationship dynamics are changing in the modern marketplace and there is no loyalty unless a mutual relationship between each is established) along with some semi-useful advice about pitching to VCs and the importance of hiring a “professional” CEO.
#39: The 18 Mistakes the Kill Startups (by Paul Graham):
There’s only one mistake that kills startups: not making something users want. If you make something users want, you'll most likely be fine.
This is a list of 18 things that cause startups not to make something users want:
Single founder: few companies are started by one person. There’s a reason for this – most people can’t handle running a company by themselves, but also: if you have co-founders and people that depend on you, you won’t want to let them down.
Bad location: Startups prosper in some areas but not in others. Main locations where startups thrive? Silicon Valley, Boston, Seattle, Austin, Denver and New York. There’s a huge drop off as we go down.
Marginal Niche: choosing a small, obscure niche market in the hope of avoiding competition.
Imitating Other Companies: most successful companies / startups aren’t started through imitation. Solve problems that affect you personally – don’t imitate others. “Instead of starting from companies and working back to the problems they solved, look for problems and imagine the company that might solve them.”
Not Being Open to New Ideas: Most successful startups end up doing something different than what they originally intended. Many pivot into new areas so you have to be adaptable and open to new ideas / avenues.
Hiring Bad Programmers: what killed most of the startups in the e-commerce space in the 90s was bad programmers / business guys. Most successful companies he founded were run by programmers. Programmers know how to hire good programmers – business guys don’t.
Choosing the Wrong Platform: PayPal dodged a bullet when they merged with X.com. Their new CEO (Musk) wanted to use the Windows platform but the PayPal team showed that the software scaled only 1% as well as it did on Unix. Switching CEOs took them on a new path and were keys in their success. How do you choose the right platform? Hire good programmers and let them choose (or talk to other programmers in comp sci departments).
Slowness in Launching: force yourself to launch things quickly. The best form of feedback you can get is directly from your users.
Launching Too Early: launching slowly kills more startups than launching early, but launching early can also be detrimental. If you scare away your early adopters, many may not come back. Think about the overall goal, then start by writing the smallest subset of it that does anything useful and launch it. Early adapters don’t expect a new launch to do everything; it just has to do something.
Having No Specific User in Mind: you can’t make great things unless you understand its users. This is why most successful start ups start off as something the founders are trying to solve themselves. If the problem you’re solving doesn’t involve you, you need empirical / measurable feedback from your users.
Raising Too Little Money: startup funding is measured in time. How much run-way do you have to be profitable? If you don’t have enough, there is a high chance your start-up will fail. That’s why the general advice is to keep costs low initially and to spend all your time in building a solid prototype.
Spending Too Much: the number one issue that tends to happen is hiring too many people. This slows you down and increases your costs. Avoid hiring people unless it’s necessary. Also, pay people with equity rather than salary and only hire people who are either going to code or go out and get users.
Raising Too Much Money: there is pressure with taking on money, and it limits you in pivoting if you do need to pivot. Raising capital also usually takes a long time. Advice to founders is to take the first reasonable deal they can get from VCs.
Poor Investor Management: you have to manage your investors: You as the founder have to dictate where the company goes, not them. If you raise too much money, they will be your boss. If things go well and your company grows rapidly, usually they’ll leave you alone but if this isn’t the case be ready to deal with trouble.
Sacrificing Users to (Supposed) Profit: “In version 1, solve the core problem. And the core problem in a startup is how to create wealth (= how much people want something x the number who want it), not how to convert that wealth into money.” Advises company to worry about building the product or something people want first and worry about the business model later (side note: this is something which I largely disagree with).
Not Wanting to Get Your Hands Dirty: as a founder, you can’t spend all your time programming. You have to get into the business and find users / make sales.
Fights Between Founders: fights between founders are very common (20% of their startups had a founder leave). This doesn’t kill a startup though (Blogger recovered from having one founder to being successful). If you have a bad feeling about a founder, let it be known and don’t hide it. People are the most important ingredient in a startup.
A Half-Hearted Effort: Most startups fail because they don't make something people want, and the reason most don't is that they don't try hard enough. Most successful start-ups are also led by founders who quit their day-jobs to dedicate their time fully to the startup – they are fully committed to the startup and idea and are willing to dedicate enough energy to making things happen.
#40: Bill Walsh, The Score Takes Care of Itself, pp. 2-31, 137-146, 202-203
“His mind for technical football was extraordinary, but beyond that was his ability to organize and manage his staff, players, everybody—to get the whole organization on exactly the same page. On that page he set the standard for how he wanted things done, and his standard was simple: perfection. That’s what he taught us individually and as a group—to believe it could be achieved and then achieve it (or come close). He had in his mind this ideal—an image of perfect football—coupled with the nuts-and-bolts details of how to accomplish it, which he then taught.”
His primary leadership asset: his ability to teach people how to think and play at a different and much higher, and, at times, perfect level.
Three main ways he did it in 1) he had tremendous knowledge of all aspects of football 2) he brought in great staff and coaches who knew how to coach and 3) he taught players to hate mistakes.
Got all players to strive to be perfect in games and in practice. If you aim for perfection and miss, you’re still pretty good. If you aim for mediocrity…
Bill didn’t jump on anyone for making mistakes. Instead he found out what was wrong and taught others how to correct it. He taught the smallest details in perfecting performance.
He didn’t view the organization as a group of separate individuals. He viewed people as being the heart of the organization.
Was an amazing problem solver: knew how to look at things differently and break down complex things into individual parts to make them simpler. He loved lists.
Was an educator and teacher. He studied other great coaches and also learned from them.
Almost always, your road to victory goes through a place called ‘failure.’ However, a good leader intelligently and relentlessly seeks solutions that will increase his chances of succeeding and prevailing in a competitive environment. When you do that, the score will take care of itself.
“Pursuing your ambitions, especially those of any magnitude, can be grueling and hazardous, and produce agonizing failure along the way, but achieving those goals is among life’s most gratifying and thrilling experiences. The ability to survive and overcome the former to attain the latter is a fundamental difference between winners and losers. I’ve observed that if individuals who prevail in a highly competitive environment have any one thing in common besides success, it is failure—and their ability to overcome it.”
Being the best has a price: “If you’re up at 3 A.M. every night talking into a tape recorder and writing notes on scraps of paper, have a knot in your stomach and a rash on your skin, are losing sleep and losing touch with your wife and kids, have no appetite or sense of humor, and feel that everything might turn out wrong, then you’re probably doing the job.”
Talks about his times as a coach where he was devastated by defeat and failure and was very close to resigning (but didn’t): “When the inevitable setback, loss, failure, or defeat comes crashing down on you—losing a big sale, being passed over for a career-making promotion, even getting fired—allow yourself the “grieving time,” but then recognize that the road to recovery and victory lies in having the strength to get up off the mat and start planning your next move. This is how you must think if you want to win. Otherwise you have lost.”
During the ensuing fourteen years after his ‘big’ failure, the 49ers won five championships. The worst had been over. This happened because at the moment of his deepest despair, he had the strength to stand up and keep fighting.
How did he turn 49ers around? He implemented a Standard of Performance: ‘regardless of your specific job, it is vital to our team that you do that job at the highest possible level in all its various aspects, both mental and physical.’
If you were lucky enough to receive a 49er paycheck, it meant you were part of an organization that had high expectations of itself and of you, whether you were a superstar or a secretary, manager or maintenance man, athlete, executive, or head coach. Those expectations, of course, went beyond ethics and attitude to specific performance standards and actions.
In regards to linesmen, the coaching staff identified 30 specific skills they needed to master in order to the job at the highest level and created multiple drills for each one of those skills which were practiced relentlessly until their execution as automatic.
Passing routes were designed down to the inch and then practiced until receivers learned how to be at that exact inch at the exact moment the ball arrived.
Treated all people the same: it doesn’t matter if you were the start quarterback or secretary, everyone was part of the organization and needed to embrace his principles.
Instead of making winning the primary goal, he focused in on getting people to focus on improving their actions and attitude and obsessing about the quality of their execution and the content of their thinking through following his standard of performance.
Hired people based on the characteristics he valued most: talent, character, functional intelligence, and an eagerness to adopt to his way of doing things.
“The leader’s job is to facilitate a battlefield-like sense of camaraderie among his or her personnel, an environment for people to find a way to bond together, to care about one another and the work they do, to feel the connection and extension so necessary for great results. Ultimately, it’s the strongest bond of all, even stronger than money.”
Don’t seek ‘conventional’ approaches or wisdom (it produces average results). Jerry Rice coming out of school wasn’t considered a top-flight prospect due to his limited forty-yard time according to scouts, but Walsh recognized that there was more to simple running speed when it comes down to receiving (he knew how to get open, catch the ball, and gain yardage with ease) and Walsh ended up drafting him 1st. Rice ended up being one of the greatest football players of all time.
Use mentors and learn from them. A good leader is always learning. The great leaders start learning young and continue until their last breath.
“Bill Walsh had the ability to change the way people thought—not just how we performed a task, but how we thought and felt about who we were. In the beginning, when we were as bad as we were, nobody was thinking about a Super Bowl. Our goal in life was just to be pretty good. Bill’s goal in life was to convince us that we could be great. And he did; and we were. That’s why he was such a great leader.”
The path to mastery: practice, continual improvement, and mastering the fundamentals. Joe Montana and Jerry Rice were constantly practicing and trying to improve. Even at the last stages of their careers were still working very hard on the fundamental things that high-school kids won’t do because it’s too damn dull.
Hard work is the key to success. You as a leader need to lead by example, but it’s not up to you alone. Bring in people that put the work in.
“I sought perfection, and 99 percent isn’t perfection. Why ‘almost perfect’ wasn’t enough for me is something I can’t explain.”
Superb, reliable results take time. The little improvements that lead to impressive achievements come from a series of months and years until your organization knows what you are teaching inside and out and everyone is able to execute their responsibilities in all ways at the highest level.
#41: High Output Management (by Andy Grove) (Chapters 3 (optional), 4, 9, 11, 13, 14)
I didn’t have time to summarize this book / recommended chapters, but if you’re curious you can find a great summary and notes on it in the provided link (available in the heading title).
#42: Making Yourself a CEO (by Ben Horowitz):
Being a CEO doesn’t come very naturally to most people. Developing the skill set to be a good CEO usually takes years of experience / practice.
Most people have a natural instinct to do things that make people like them (enhancing their chance of survival), but a good CEO must do many things that upset people in the short run in order to be liked in the long run, which is in many ways unnatural.
An important part of being a good CEO is giving feedback. Earlier in his career, he believed in the shit sandwich approach to feedback (wrap the bad feedback / news (shit) with a layer of good feedback (bread)) but it came off badly.
Here are the keys to be an effective CEO:
Be authentic: believe in the information / feedback which you hand out.
Come from the right place: give people feedback because you want the to succeed – not fail.
Don’t get personal: if you decide to fire someone, fire them.
Don’t embarrass / clown other people in front of others.
Tailor your feedback to the employee: not everyone is the same when it comes to feedback.
Be direct, but not mean.
Keep an open door: feedback isn’t one way. Listen to what your employees have to say.
Say what you think and always express yourself. Get used to giving your company constant feedback: it gets people to get used to it (so it’s not personal) and people get comfortable with discussing bad news.
Being a CEO isn’t easy and doesn’t come naturally and there are many more unnatural things which you must do in order to be a good one. The key to becoming a good one basically is mastering the unnatural.
#43: A Good Place to Work (by Ben Horowitz):
Mostly bullshit article. Talks about how one of his employees / managers didn’t meet with his/her subordinates for over 6 months, so he called in their manager and threatened to fire both of them if they didn’t meet in 24 hours.
Apparently, meetings are very important but doesn’t go into why in much detail and gives a few analogies / stories that don’t really connect with the message.
#44: How to Minimize Politics in Your Company (by Ben Horowitz):
The CEO at a company creates politics. What is politics? ‘People advancing their careers or agendas by means other than merit and contribution.’
Apparently, giving a raise to an employee counts as political behavior (even if the said employee has a higher offer to go work else-where). Why? Because it may get other employees to ask for a raise. This encourages ‘political behavior.’ (Personal take: bullshit. Apparently companies are allowed to operate according to the principles of the free market but employees aren’t??)
Advice on minimizing politics is:
Hire people with the right kind of ambition (should value the company’s success as first and foremost priority ahead of anything else).
Avoid activities which encourage political behavior, including: performance evaluation and compensation, organizational design and territory, promotions.
Be careful with “he said, she said.” Apparently even listening to another employee complaining about another one will get others to notice and may encourage further bad behavior. If an employee has a problem with an executive – get them in the room together and get them to talk it out. If you hear another executive complaining about another executive? Try to ignore it and assess it yourself. Doesn’t address what to do if non-executives complain (apparently to him they might not matter?).
Personal take: Sorry, but most of these write-ups by Mr. Horowitz come off as complete bullshit and in my opinion are extremely bad advice. Read at your own discretion.
#45: [video] Hosain Rahman (at Startup School 2014):
Talks about the early days prior to having success: silicon valley was struggling at the time and mobile didn’t take off, but their idea was to bring ‘Siri’ and a better way to interact with voice technology.
Pivoted from that idea to noise-canceling: discovered this by accident as a product of attempting to develop voice-technology.
Convincing people to invest with them was really hard at the time.
Raising first 500,000 was harder than raising the first 100 million.
Focused on little details and product: how do they deliver a great experience to customers?
First head-set they released wasn’t a hit. In order to hit deadlines, they compromised the end-product.
They ended up running out of money and investors lost faith. They still believed in their product though. They paid off 600,000 in debt and took on another DARPA contract.
Failure is the best thing to learn from: they ruminated over all of the things they did wrong with their first effort and started again. Realized that the product had to be packaged correctly in order to make it a success.
Worked for next 2 years with no salaries.
Their next launch: had issues with manufacturer releasing product from customs. Had only 2K in the bank and they wouldn’t release, so they had to raise money to get it released. They had a huge amount of success with this product (revenue was 70 million in the first year).
Key lesson: you have to focus on solving problems ruthlessly to make product work and to package it correctly.
Hit another huge bump on the read in 2008 (lots of orders were canceled). Hit another issue in regards to product quality when launching another head set after. Focused on putting customer first and solving the problem. Learned to persevere from earlier experiences.
To solve issues, he focused on ‘doing what’s right’ and putting customers first.
Talks about difference between hardware and software. Hardware: have to focus on selling something for a higher price than what it cost them to make it (had to have discipline in choosing parts / making decisions). Had to infuse that same discipline in their software division.
Talks about the importance of great design in both hardware and software and how important it is to get it right.
#46 & #47: Some Great Advice on Hiring a Lawyer and the Following Link:
Mostly quality advice on hiring a lawyer that I won’t include here.
#49: How I Raised Myself From Failure to Success In Selling (by Frank Bettger):
This is one of the best books on selling that I’ve ever read and I highly recommend it. It mostly talks about Frank Bettger and what he did to overcome his failure in sales to become masterful at it. The key points from the book and summarized below:
The importance of enthusiasm: talks about how he was demoted for being ‘too lazy’ to being promoted and having his salary go up more than 700% simply by forcing himself to be enthusiastic. The enthusiasm went over and impacted his team-mates by quite a lot.
Enthusiasm is the most important part of selling. It doesn’t matter how much you know. Showing enthusiasm is vital and carries over to your client. The best salesmen all have great enthusiasm.
Force yourself to tell your story / see at least 4 or 5 people every day. He forced himself to make at least 4-5 calls every single day. Kept records of each one and calculated that it made a huge difference. Calculated that each call was worth 2.30 (which amounted to quite a bit) over the year.
Keep records of what you do (be data driven): he saw that his success rate was 70 percent for his first interview, 23 percent for his second, and 7 percent for third. This made him realize what to focus his energy on and improved his per call metrics from 2.80 dollars per call to 4.27. Keeping records is vital to improvement.
You must make calls in order to be successful in selling.
The importance of hard work: sales is the easiest job in the world if you work hard, but the hardest one in the world if you aren’t trying.
The importance of public speaking: talks about how he went from being terrified to speaking to crowds to taking a course in public speaking which got him to get rid of the fear. ‘Join only a course where you make a talk at every meeting because that’s what you want – experience is speaking.’
When you lose your fear of speaking to an audience, you lose your fear of talking to individuals, no matter how big and important they are.
The best way he every found to help him overcome fear and rapidly develop courage and self-confidence is through public speaking and speaking in front of groups. Almost all leaders have courage and self-confidence, so this is important.
The importance of planning: realized that he wasn’t meeting his call goals and started dedicating each Saturday to planning. Studied his records and made notes in preparation for each week to the extent of what he would say / do and making a schedule to make each call which lead to outstanding results.
Become an early riser: Benjamin Franklin advised many others to raise early and he used the same approach. He gave the same advice to his peers and it worked great for them as well.
Take more time to think and do things in the order of their importance (and to also plan them).
Set aside one day as a ‘self-organization’ day and plan your hours: many successful people are strict with planning and utilizing their time in the correct manner each day.
Talks about how he made an outstanding sale to someone who didn’t seem like he wanted it, but he was persistent enough to stick around and get them interested and to eventually buy in. ‘The most important secret of salesmanship is to find out what the other fellow wants, then help him find the best way to get it.’ If you remember this one rule, selling will be easy.
Talks about a sale he made to a businessman: he convinced him to focus on the future of his business (where he highlighted an issue of what will happen to him once he passed away). The businessman accepted this and he made more money that day than he had in the previous year.
Resolved right then and there to dedicate the rest of his selling career to this principle: Finding out what people want and helping them get it.
The importance of framing things the right way: talks about how he got 2 calls pitching him to speak in public at an event. The first call framed things in terms of the speaker. The second framed things in terms of his own frame of reference (i.e. caller go him to envision himself when he was young and realize how important the talk would have been to him). The second call got him to say yes.
Talks about an unsuccessful salesman who sold magazines: usually the objection is that they didn’t have the time to read what he sold. He took this and re-framed his sales pitch as ‘reading this means that you get a summary of all news in one short evening of reading’ thus turning the problem on its head: he was actually selling the most precious thing in life, more time. That approach turned his failure into a success.
‘When you show a man what he wants, he’ll move heaven and earth to get it.’ Talks about the importance of phrasing things in terms of what his prospects wanted – not what he wanted.
Three important lessons:
The most important secret of salesmanship is to find out what the others want and help them find the best way to get it.
There is only one way to get someone to do something: by making the other person want to do it. There is no other way.
When you show a man what he wants, he will move heaven and earth to get it.
Elliot Hall’s lesson: Elliot had been unsuccessful as a salesman and one of the reasons was because he was ‘too positive.’ Realized that instead of trying to be positive and facing objections – whenever a prospect had an objection, he would come up with a question. He would keep asking questions (that got the prospect to say ‘yes’) until coming to just one conclusion – a sound conclusion which was based on facts.
Elliot Hall’s questions had just one purpose: ‘to help the other fellow recognize what he wants, and then help him decide how to get it.’ Whenever Elliot would have an objection he would follow up with . ‘Let me help you ____ (resolve the objection) ____.’ He never objected or disagreed with anyone. Learned from Elliot that mastering the art of asking questions was a key to becoming a successful salesman.
The author goes through a sale he made by asking follow up questions and noting down some take-aways on making such sales:
Make appointments: be expected. You gain a big advantage in doing so. It tells the person that you appreciate the value of his/her time.
Be prepared: ask the question ‘what is the key issue?’ in helping you prepare.
Questions to ask? What is the key issue? Or, what is the major point of interest? Or, what is the most vulnerable point?
Make key-word notes. Unless you make notes, you’re bound to forget what you plan to present. Prior to the interview, rehearse and review the notes over and over again (you should know exactly what you will say and how to say it.)
Ask questions: this is vital to getting a sale.
Explode dynamite: do something startling / surprising. (During his earlier example, he insisted that he and his client go to a doctors appointment immediately). It’s necessary to arouse and stir people to take action for their own benefit.
Arouse fear: there are 2 main factors that move men into action: desire for gain and a fear of loss.
Create confidence:
Imagine yourself to be a salaried employee at your prospect’s company. You can imagine yourself as being an ‘assistant-buyer’ for the prospect in question which should inspire you to be more confident.
Also: ‘If you were my own brother, I’d say to you what I’m going to say to you now…’ is another confidence gainer.
Praise your competitors.
Create a powerful selling phrase ‘I am in position to do something for you this morning that no other living person can do.’
Express honest appreciation of your listener’s ability (people like feeling important and are hungry for praise) but don’t go overboard.
Assume a close: have a winning attitude.
Put YOU in the interview: it’s a superb way for you to make sure you’re practicing the most important rule of all: seeing things from the other person’s point of view and talking in terms of his/her needs, wants, and desires. Strike out ‘I’ or ‘we’ and change it to ‘you’ or ‘your.’
Talks about the importance of asking your prospect questions and getting to know them. Talks about a case where one man wouldn’t talk with him but he showed up and asked him the question ‘how did you get into this business?’ and the prospect opened up to him (and discussed things that even his wife didn’t know). His follow up and plan after this won him a sale.
Six things you gain through the question method:
Helps avoid arguments.
Helps avoid talking too much.
Enables you to help the other person recognize what he/she wants.
Helps crystallize the other person’s thinking (the idea becomes his idea).
Helps you find the most vulnerable point with which to close the sale...the key issue.
Gives the other person a feeling of importance (when you respect his/her opinion, they’ll respect yours).
Key question to ask when going into a sale: what is the key issue?
How do you identify the key issue?
What is the basic need?
What is the main point of interest; the most vulnerable point?
If you try to argue each of your opponent’s issues one-by-one, you’ll never win. Identify the key one. How do you do so? Get your opponent to talk. He or she will most likely list a few but he’ll keep coming back to the key issue.
The main problem of the sale is to:
Find the basic need, or
The main point of interest.
Then stick to it!
What’s the most important word in the English language? Why.
If someone objects to you, ask why? Keep asking it and your prospect will may eventually find the answer to his objection.
Milton Hershey had 3 failures before he was 40. He asked the question: why? He realized that the reason was that he didn’t have all the facts. Ever since then, he kept asking the why question.
The real reason for not buying: many prospects won’t give you the real reason they won’t buy right away (he collected data from his sales, and realized that 62% of the time the first thing his prospects listed was not the real reason they didn’t want to buy).
Always ask: ‘In addition to that, isn’t there something else in the back of your mind?’ after a prospect objects to get them to possibly open up and to find the real reason behind their objection.
A man has two reasons for doing a thing: one that sounds good, and the real one.
The best formula he ever found to draw out the real one is built around these 2 little questions:
‘Why?’
‘In addition to that…’
The importance of being a good listener: talks about one sale which he had where he simply asked the prospect about his family. After talking for about 3 hours, he was about to say good-bye (without saying anything about himself) – when the prospect turned into a sale. Sometimes, simply listening gets the job done. Always show the other person that you’re sincerely interested in what they’re saying. Listening has become a rare art. Good listeners are rare.
Whenever you’re talking and you find someone disengaged or not responding (they’re not really listening to you): stop talking. Nine out of ten times they’ll start talking and say what’s on their mind. Even if there’s an uncomfortable silence, usually the prospect will break it.
When listening: don’t focus in on what you’re going to say next. Really listen.
Be honest: The best talker doesn’t win the sale – the most honest one does. To win confidence, you must deserve confidence – and this is done through honesty.
Be the best informed: knowledge is power. Knew 2 salesman early in his career that brought in 70 percent of the profits out of an office with 16. Those 2 men were continually being consulted by other salesmen – they were the best informed. When asked where they got their info from: ‘I subscribe to services that give all the legal answers, sales ideas, etc… and I read the best journals and magazines.’
Always make time to read and learn new things. One of the best doctors he knew was still learning and staying engaged at the age of 66.
In other words: know your business and keep on knowing your business.
Praise your competitors: talks about how he made an important sale where he asked the prospect what companies he was insured with. After answering, he praised the companies and gave good info on all 3 companies and called them world class. After doing so – he made his sales pitch and won the prospect over.
The power of witnesses: talks about the power of getting other customers to give testimony on the product. He would sometimes make calls in the middle of the sales pitch to existing customers and ask them what they thought about x and y, and the testimony would do a great deal in winning the prospect over.
The importance of grooming and being well dressed: Unless the man looks the part, people won’t believe what he says is important. Be well dressed and have a professional appearance (also advises to wear suits / shoes / etc.. on alternate days to preserve their life). Ask experts for help in helping you ‘look professional’ and giving you advice on what to wear / buy.
Main reminders:
Deserve confidence: the real test is: do you believe it, not will the other person believe it.
To win the confidence of others, you have to know your business … and keep knowing your business. Always study and look to learn new things.
Benjamin Franklin’s key motto: “I will speak ill of no man – and speak all the good I know of everybody.” (Praise your competitors).
Cultivate the habit of making understatements; never exaggerate!
An infallible way to gain a man’s confidence: bring on your own witness (use a telephone).
Look your best.
One of the greatest questions to ask your prospects is ‘How did you ever get started in this business?’ Many times it opens doors.
Praise is another way to get through the door: many businesses and people don’t get enough praise / compliments.
He kept cards on the people he met throughout the years and information they told him: many people are amazed that he remembered so much. Careful notes / cards made things easier for him. Advises everyone to do the same.
“If you would win man to your cause, first convince him that you are his sincere friend.” - Lincoln.
Encourage young men and help them see how they could be successes in life. Tells a story how he told a young man that he would become president of the company one day – and the prediction came to be true. Try to get men to tell you their highest ambitions in life and help them raise to it.
If anyone has inspired you or helped you in any way in life, don’t keep it a secret. Tell other people about it.
The importance of smiling: action seems to follow feeling, but really action and feeling go together. Give every living soul you meet the best smile you ever smiled in your life and see how much better you feel and look.
The importance of remembering names: When you meet someone, your entire focus should be on them (and remembering his/her face and name). If you didn’t get the name, simply ask them to repeat it – then, take a mental snapshot of the face/name so that you’ll remember it.
In sum, to remember names:
Impression: get a clear impression of his/her name and face.
Repetition: Repeat his/her name at short intervals.
Association: Associate it with an action picture, if possible, include the person’s business.
Brevity: don’t over-talk. Be succinct and get to the point (long talks bore people).
‘At a recent meeting of purchasing agents, we took a vote to find out the biggest reason why salesmen lose business.’ → ‘The vote was three to one that salesmen talk too much.’
Before he makes a phone-call, he makes a list of things he wants to talk about and gets to each point: ‘I know you are busy, there are just four things I want to take up with you…’
If you’re scared, admit it!! Many big men and huge public figures have been in the same situation – there’s no reason to feel ashamed of it or to hide it, so if you’re speaking to someone big or high-up, you pay him/her a compliment by admitting that you’re scared!
The approach: the approach which you plan is very important. ‘In my twenty-five years of selling, the best approach I ever found was to first find out about a prospect’s hobby, and then talk about that hobby.’ Also gives a story about winning a prospect over by playing with his young daughter (and getting invited to her birthday party).
The first and most important step of selling: ‘Sell yourself first.’ Talks about another salesman that was very successful simply by having a very welcoming and embracing approach and making each customer entering his store feel fantastic.
The Questionnaire: he had a questionnaire that he would use which would take each prospect 5 to 10 minutes to answer:
What minimum monthly income would your wife need in the event of your death?
Minimum monthly income for yourself at age 65?
What is the present value of your estate?
Stocks bonds, other securities?
Real estate (mortgages)?
Cash on hand?
Earned annual income?
Your life insurance?
How much do you pay out each year for insurance?
The above would give him ample information which he could use to win the prospect over whenever he got back to them.
An approach must have only one objective: selling the sales interview -- not the product, your interview. It is the sale before the sale.
Making appointments: talks about how a barber was able to revive his business simply by asking his customers to make appointments instead of doing first-come first-serve. Many people prefer appointments. They save time – they give appreciation to the customers’ time and it makes each call an event.
Making appointments is like getting on-base in baseball: the foundations in sales relies on getting interviews.
Persistence: some of the hardest prospects he took on wouldn’t make appointments with him, but he persisted and won the sale over simply by persevering and getting a chance to talk with them / approaching them.
The importance of practice and rehearsal: takes us through a few stories where he makes it clear that practice makes perfect – many people who made it made it through hard-work and practice. Rehearsing his sales calls with another work-mate made his pitches better.
The best time to prepare a sales talk is right after you made one: all the things you should have said and should not have said are fresh in your mind. Write them down immediately!
Write your talk out word for word. Keep on improving it. Read it and reread it until you know it (but don’t memorize it). Try it out on your wife. If it’s bad, she’ll tell you. Deliver it to your manager and another salesman. Give it until you love it.
One demonstration is worth more than a thousand words: If possible, let the customer / prospect perform the demonstration and let them help you make the sale. Gives a few examples where demos played an important role in landing the sale (including one where he placed a quarter and dime next to a pen to demo how much of the estate goes to a customer’s family – he would say the quarter is what the prospect has, and the dime is how much is left to the family after the executors are done after he passes).
Never forget a customer; never let a customer forget you: out of the 33 cars he bought, he dealt with 33 different salesmen. Not one of the salesmen he dealt with thought of picking up the phone and following up with him. Chevrolet Motor adopted the motto of never forgetting a customer and were first in sales for 13 / 15 years.
Gives another example where a business would follow up with customers on how they were doing soon after making a sale. If the customers need any help – they helped them out and this in turn lead to other possible prospects. ‘If you take care of your customers, they take care of you.’
When is the best time to follow a referred lead? Six days or six weeks? The real answer: six minutes!!
Never fail to show appreciation for a lead. Report results whether good or bad.
Play position for the next shot (just as in pool – look for the next opportunity / lead whenever possible). ‘Prospecting is like shaving...if you don’t do something about it every day, first thing you know, you’ll be a bum.’
Earlier in his career – he had issues closing a sale. Most of his sales were being done on the first interview and only 23 percent we successful on follow up second interview (with 7 percent being successful on the third). Learned something important about closing: appeal to action!! Some rules which he used to close a sale:
Save closing points for the close (he used to use them too early). Average successful sale goes through 4 steps: 1) Attention, 2) Interest, 3) Desire, 4) Close. Save the enthusiasm / excitement in the closing points for the end of the sale.
Summarize: a summary should be brief and only take you a few seconds to voice.
The magic phrase: ‘How do you like it?’ After summarizing the pitch for the prospects, he asks this question and if the answer is yes, he asks the prospect a few more questions (and tries to get them to say ‘yes’ a few more times) and usually he already has the sale and is in the process of filling out their application form.
Welcome objections and have persistence: some of his best sales prospects have been ones who objected. ‘I can’t afford it.’ or ‘come back in January’ were all great news to him: it told him the prospect wanted the product. An objection is not a turn-down.
Why? … in addition to that … ? If a prospect isn’t willing to commit yet, usually asks the why questions and follows up with more questions (‘if you were my own brother, I’d say to you what I’m going to say to you now’) and the persistence does pay off. ‘Why’ gets the customer talking and brings out his objections. ‘In addition to that’ finds the real reason, or the key issue.
Always have an ‘X’ penciled in where the prospect signs.
Get the prospect to commit / pay as soon as you can. Once someone commits money to the sale, they rarely pull out.
Check yourself every day on these closing rules. Apply them until they become habits.
Approach each interview like it will be the best interview you ever had.
If you’re unsuccessful after the prospect interview, make notes and review them.
Remove barriers to entry: make it easy for the prospect to buy / sign. Tells a story on how he followed up with a prospect on a second interview by filling out his insurance application form and asking him to sign. The prospect wanted no part of this initially but did end up signing and paying up when he showed up and presented the filled out paper-work:
Write up the order or application or contract in advance, even though you may only have the prospect’s name and address on it.
Mark a heavy ‘X’ in each place where he/she is to sign.
Your first words: ‘Is that right, Mr. Blank?’ laying the paper on his desk directly in front of him. If it is a stand-up interview, place the unfolded paper in his hands.
The ball is now down on his/her one-yard line and the momentum is with you.
Don’t fear failure: embrace it. Babe Ruth struck out over 1000 times, but he isn’t remembered for that. If you fail, keep going: each week and each month you’re improving. Once day soon, you will find a way to do the thing that looks impossible today. Courage is not the absence of fear; it is the conquest of it.
Benjamin Franklin’s secret of success: Franklin chose 13 subjects which he felt were necessary or desirable for him to acquire and try to master, and he gave a week’s strict attention to each subject successfully (and repeated this process 4X per year).
Frank Bettinger made his own list of 13 subjects, and they were: 1) Enthusiasm 2) Order: self-organization 3) Think in terms of the others’ interests. 4) Questions 5) Key issue 6) Silence: listen 7) Sincerity: deserve confidence 8) Knowledge of my business 9) Appreciation and praise 10) Smile: happiness 11) Remember names and faces 12) Service and prospecting. 13) Closing the sale: action.
Each week, he carried a card in his pocket and focused on emphasizing that one principle during the week.
‘Whether you are a printer, salesman, banking, or candy pushcart peddler, let’s assume that you select thirteen subjects best suited to you. By concentrating on one thing at a time, you will get farther with it in one week than you otherwise would in a year. A new confidence will take hold of you. At the end of 13 weeks, I know you will be surprised with your progress.’
#50: Five ways to build a $100 million business (by Cristoph Janz):
To build a company generating $100 million you need:
1,000 enterprise customers paying you $100k+ per year each or
10,000 medium-sized companies paying you $10k+ per year each; or
100,000 small businesses paying you $1k+ per year each; or
1 million consumers paying you $100+ per year each or
10 million active consumers who you monetize at $10+ per year each by selling ads
Salespeople sometimes refer to “elephants”, “deers” and “rabbits” when they talk about the first three categories of customers. To extend the metaphor to the 4th and 5th type of customer, let’s call them “mice” and “flies.”
Hunting flies: to get over 10 million users, you need 100+ million downloads AND either 1) have a product that is social and has a high viral coefficient (i.e. Facebook, WhatsApp) or 2) have a ton of user-generated content which leads to large amounts of SEO traffic (i.e. Yelp).
Hunting mice: to acquire 1 million customers paying 100 dollars a year you need 10 to 20 million downloads and a level of virality. Examples of this type of business are Evernote and MailChimp.
Hunting rabbits: to acquire 100,000 customers paying 1K per year, you need 0.5 to 2 million trial sign-ups along with inbound marketing, a focus on promoting your NPS score and sales funnel optimization although there is no silver bullet here.
Hunting deer: to acquire 10,000 customers paying 10K a year, most of the rabbit hunting techniques still apply along with maybe needing an inside sales force to generate or close leads along with an experienced VP of sales.
Hunting elephants: most of the big SaaS companies are elephants (i.e. have a few large enterprises paying for expensive subscriptions) and they include Workday and SalesForce. Remember, here you only need 1,000 customers paying 100K a year which is less than one executive per company (so it’s not that much money).
If you have 100 million in revenue, you’re looking at an exit of anywhere from 500 million to a billion and over.
Overall, going through most of the material was very useful, although the perception I had was that it was mostly centered on founders who wanted to go in the ‘move fast and break things’ category. It’s my firm belief that there are more sustainable approaches to building companies – albeit most of the advice here focuses on start-ups. Approaches that focus on generating income rather than continually growing revenue which YC seems to be obsessed with tend to be more promising approaches when capital / lending is expensive (i.e. when interest rates are high), and we’re currently in a high-interest rate environment. Either way, I did agree with most of the general advice so it’s still extremely great advice for a lot of founders. Some key ideas which really stuck with me are outlined below:
Start ups are hard and not for everyone. If you do start a start up, you are in for a very painful road, albeit one that also has a ton of rewards.
To be successful at starting a startup, you need to be passionate about the idea. Entrepreneurship is hard.
Focus on a small market and aim to make something insanely great. Choose to build something a small amount of users really want rather than a large group of users somewhat want.
Keep your expenses low and minimize your commitments.
The key factor which will determine whether a start-up and company will be successful is hard work and determination. This is the number one factor which determines whether you’ll succeed.
Ignore the haters and work on whatever you find interesting.
Build something that solves your own problem(s). You have to have passion for the idea that you’re bringing about.
Do things that don’t scale: pay attention to the early users and take extra measures to not only acquire them, but to make them incredibly happy (you can focus on scaling later).
Live in the future, then build what's missing. That describes the way many if not most of the biggest startups got started. Try to notice and find things that seem to be missing. Turn off the normal perceptual filters which you use in everyday life and open up.
Talk to other people about their unmet needs. Find the gaps that they believe exist in the world. What's missing? What would they like to do that they can't? What's tedious or annoying, particularly in their work?
If you want to create and capture lasting value, don’t build an undifferentiated commodity business and avoid markets which have destructive competition (like the airline or restaurant industries). Look to build differentiated products and a monopoly (like Google).
If you have a competitor that’s growing faster than you - you may need to assess how fast the growth is and make sure that you don’t let them capture the entire market (i.e. think Oracle vs. Ingres: Oracle sucked but the obsession on growth allowed it to capture the market).
Keep on adding new product innovations and new features to the core business: what do the users want and how can you make your core product better?
Take Zuckerberg’s advice: listen to your users, stay simple, be reliable.
Willpower and cognitive processing draw from the same pool of resources: don’t make your users think. Make the product simple and less cognitively demanding.
Do field studies and usability testing and use them to make it easy for your target users to do what they want.
The press is only a tool and can kill young companies. Things you should focus on: What problem am I solving for customers? Does my startup have a reason to exist? How can I make my service even better? Am I improving things for the economy or society at large? Who is your closest competitor and what do you do differently?
Software is eating the world: many new business are now migrating to being on-line, and it’s now easier to build a software based business than during any other point in history. This is a tremendous opportunity for many entrepreneurs.
How to pitch successfully: make something worth investing in, understand why it’s worth investing it and explain it clearly.
Don’t get addicted to fundraising: you should be listening to your users, not focusing on raising money. Also, don’t raise too much money.
Encourage your employees to be open and to share as much as possible at work. Your job is to deliver happiness to customers, employees and investors.
Build a strong culture by doing things the right way and have trust in your employees to do the right thing. Embrace employee openness and foster communication through sharing. Try to get everyone together (lunch / events) and have fun. Hire only the best.
Hiring is really hard and really important. In fact, it’s most likely the most important thing a founder does. Hire people that aren’t a**holes and that you like. Look for smart and effective people that get things done.
Be generous with compensation – especially when it comes to giving equity. Give your employees a share in the company and shared goals and values that align with your own.
Market is cyclical and investors tend to act in waves: understand that this happens and that many people follow each other, so the waves will come and go. A smart investor ignores them and invests in people who want to build great things and have perseverance.
There’s only one mistake that kills startups: not making something users want. If you make something users want, you'll most likely be fine.
Follow Bill Walsh’s advice: Focus on improving yourself and your team - as well as perfecting the fine details that matter and the score will take care of itself.
Don’t ever compromise the end-product: focus on building and packaging something great for your customers / end-users. If you package something that looks like garbage, it’ll result in garbage. Also, embrace failure and don’t give up: perseverance is the most important factor in determining whether you’ll be successful.
Follow the advice in and read the book 'How I Raised Myself From Failure to Success In Selling’ if you want to find some great tips on being a great salesman. I included detailed notes and a summary above, but reading the book was invaluable and I highly highly recommend it to everyone.
Hopefully you find these notes useful and hopefully they help other people in starting their own company. I’m also extremely sorry for not being able to include more material. My overall favorite talk is creative mornings with Ben Chestnut:
There’s also other great material there which I either may have missed or which I didn’t have time to include. I highly urge any founders to actually go through and read all of the material rather than just skimming my notes. Either way, if you have any improvement suggestions or want me to include anything, please let me know and I’ll be more than happy to do so. If you found these summaries helpful, please make sure to like and share :)