One thing I love about the product management role is that it exposes you to a much broader range of skills to learn (beyond product features and people management), including design, user behavior, as well as business aspects including go to market, sales strategy, pricing, etc. Just like a developer lead becomes the de-facto CTO for a product/start-up/business unit, the product manager becomes the de-facto CEO for the same.
I think there's also a theme around young founders, the ability to work as a team when the going gets tough, hubris, and the fame that comes with being in YC.
During YC, you're in a very controlled environment - everyone around you is working hard, you have a deadline, you don't have money, and you just focus on building, etc. Once you leave YC, suddenly, a few things happen (I've seen this with exactly 2 start-ups so apologies for extrapolating):
1. You suddenly have a lot more money, and simultaneously lose the very guided structure you had at YC
2. A lot of YC founders are young, haven't worked in teams with different personality types, etc before and they have to learn how to manage people and each other
3. Because growth is the only thing they've been taught to look for at YC, at the first sign of any slowdown in growth (which could be natural and acceptable, or due to some other reason), they start freaking out and churning. This further exacerbates point 2 and they start stressing out their team and each other
4. There's a bit of a personality cult around YC founders right now - I recently attended a YC party in an apartment in a fancy high-rise in SF and it's amazing how many hanger-ons that were there fawning over the founders. It was a very SF start-up version of a celebrity night-club in LA/NYC. This unfortunately builds on the narrative of infallible YC founders who are building great billion dollar companies, etc
I guess where I'm going with this is that in addition to just growth, folks need to be taught how to work in teams, how to gear up to build a longer term, sustainable company, and to appreciate that they can and will make mistakes, but they need to handle that with grace and maturity.
> and it's amazing how many hanger-ons that were there fawning over the founders. It was a very SF start-up version of a celebrity night-club in LA/NYC
Lol... I think your YMMV on what you encounter here, maybe I just know the boring founders that could care less about social status. In fact I think the ones who care about social status are by and large the ones who don't actually get accepted.
It's important that one of the key lessons here is that the CEO of Zirtual, AND their investors, failed in their responsibilities during this whole fiasco.
It looks like Zirtual's CEO screwed up all three of these - it's inexcusable and ludicrous to think she didn't know how much money was in the bank, and the burn rate. She probably knew exactly what was going to happen, she saw the writing on the wall, and tried her best to figure out an outcome for the company and team.
It could be that the Startups.co acquisition was the perfect thing to do, but to do it after missing payroll, breaking user and employee trust, and in such a ham-handed way is ridiculous. She played chicken with cash flow, and she lost. 400 employees who thought they had a job had to suddenly go through a stressful shake up, and start worrying about bills, insurance, and their livelihood, right before school season starts.
The Investors:
According to Crunchbase, this company raised $5.5M from VCs like Mayfield.
Don't these investors have an obligation/responsibility to their Limited Partners to invest their money wisely? Don't these investors ask the CEO for monthly or quarterly financial statements (or something simpler like - "How much money in the bank? What's your Accounts Receivable? What's your monthly burn rate?").
Why didn't someone say something 6 months ago? Why didn't someone say something 1 month ago, so that there could have been a more orderly pause in the business while trying to sell it?
What's the point in simply investing in deals and not spending any time to advise/help start-ups? The CEO of Zirtual could be super talented, but she's not run a start-up before. Shouldn't investors spend some time with her making sure things don't go off the rails?
It's events like this which erode trust in start-ups, investors and founders.
It's important that one of the key lessons here is that the CEO of Zirtual, AND their investors, failed in their responsibilities during this whole fiasco.
It looks like Zirtual's CEO screwed up all three of these - it's inexcusable and ludicrous to think she didn't know how much money was in the bank, and the burn rate. She probably knew exactly what was going to happen, she saw the writing on the wall, and tried her best to figure out an outcome for the company and team.
It could be that the Startups.co acquisition was the perfect thing to do, but to do it after missing payroll, breaking user and employee trust, and in such a ham-handed way is ridiculous. She played chicken with cash flow, and she lost. 400 employees who thought they had a job had to suddenly go through a stressful shake up, and start worrying about bills, insurance, and their livelihood, right before school season starts.
The Investors:
According to Crunchbase, this company raised $5.5M from VCs like Mayfield.
Don't these investors have an obligation/responsibility to their Limited Partners to invest their money wisely? Don't these investors ask the CEO for monthly or quarterly financial statements (or something simpler like - "How much money in the bank? What's your Accounts Receivable? What's your monthly burn rate?").
Why didn't someone say something 6 months ago? Why didn't someone say something 1 month ago, so that there could have been a more orderly pause in the business while trying to sell it?
What's the point in simply investing in deals and not spending any time to advise/help start-ups? The CEO of Zirtual could be super talented, but she's not run a start-up before. Shouldn't investors spend some time with her making sure things don't go off the rails?
It's events like this which erode trust in start-ups, investors and founders.
"All of these were ideas that seemed bad but turned out to be good, and this is the magic formula for major success."
I see this sentiment expressed often, like it's a good thing that you want to pursue an idea that seems bad.
If I were to think about founding a start-up, I'd rather find an opportunity that makes sense and sounds good, validate the opportunity, talk to potential customers, and do as much diligence as possible before diving in. So essentially, if something seems like a bad idea, I'd move on to the next idea.
This may make it harder to create a unicorn (since I'd clearly miss some aspect that makes the idea not bad), but I bet it's a better, less risky way of trying to achieve a high-growth start-up with great potential. Good ideas fail as well, but I'd wager it's less often than bad ideas.
I vaguely remember sama had a comment some time ago, kind of related to what you are saying here (paraphrasing here): "being contrarian is easy, being contrarian and right is hard." Working on a seemingly bad idea is being contrarian by definition, that's the easy part. And if people just take the advice at its face value and intentionally work on "bad ideas", that's being a fool. The real hard part is "being right", which requires the founder to have a unique vision or belief in his idea, and drives it really hard, maybe even to the point of being "delusional" to outsiders, but again, being delusional about your own idea doesn't guarantee it's "right".
I think you misunderstood the point of "seemingly bad ideas".
This is not about ideas that seem bad to you.
This is about ideas that seem bad to others, i.e. ideas that seem okay to you, that you probably even verified in the small, but still have trouble convincing others.
Yea, but how much of that is actually [clear understanding of idea + execution of idea] versus [marketing].
I'd say that probably at least partially depends on the group of people you know. The last set of people that I would think would be representative of a random distribution worthy of being a statistical sample is my set of friends, because not only is my idea biased, but I have also selected all of my friends with bias as well.
My general rule of thumb is 'bad ideas come out of nowhere' and 'good ideas are things that require effort'. If you are just throwing stuff at the wall to see what sticks, probably not the best way to go about doing things.
Other than that, I think the idea is hardly representative of the product. I would guess that there is probably no reliable correlation between the evaluation of the idea, and the evaluation of the execution. The examples people mention are cherry picked examples. You can hardly evaluate your own potential based on comparing that to a few select examples that have been selected specifically to demonstrate a rhetorical opinion.
> This is about ideas that seem bad to others, i.e. ideas that seem okay to you, that you probably even verified in the small, but still have trouble convincing others.
Won't a skeptical person find flaw in every idea he is confronted with? In that case, I guess it all boils down to execution. In my opinion, the "idea" need not be very clear but it is okay for it to be filmsy. Building a minimal product with a filmsy idea can help "project" to head in the right direction when you start seeing the facts.
Perhaps, the reason why Google and Facebook succeeded wasn't that the ideas were seemingly bad but "idea" didn't exist in the first place. They just wanted to build something for their own and started getting serious when it got traction.
I think the more nuanced version of the prevailing wisdom is "it seems like a bad idea to everyone else, because of a key set of facts that you know that very few other people know."
Knowing that secret, whatever it is, probably requires special insight into a particular area of the world, special ways of thinking that few others are using, and perhaps special methods of operating that few others are using.
That's how an idea that looks bad ends up being good.
Well put and totally agree - in other words, as the start-up founder, you know it's a good idea.
My cynical take on "many bad ideas become major successes" is that as an investor betting on 100 companies, your best economics are from 1 or 2 unicorns, and not 50 base hits.
The investor optimized approach is 1 or 2 crazy ideas ended up being prescient and create awesomeness, but the remaining 98 ideas are indeed bad and go nowhere. The founder optimized approach is 50 good ideas create meaningful outcomes that aren't outsized.
1. How many outstanding shares (including as yet un-granted option pool shares) - divide your grant by this number and you have your ownership share of the company
2. If you're granted RSUs, ask about whether you need to file an 83b
3. If you're granted options, ask for the price of these options (or the last common share 409A valuation). This is your cost value of each share
4. Post-money valuation of the previous round (can't be calculated by 409A since that's different, but rule of thumb is that 409A valuation X outstanding shares x 5 ~= last round valuation).
5. Post-money valuation/total outstanding shares is technically the paper-worth of your options or shares (and you can subtract the 409A valuation to get the current expected profit per share). Assuming nothing else, your shares vested per year X (valuation-409A valuation) = your paper equity salary per year
Regarding the company prospects:
1. Money in the bank
2. Monthly burn rate, at which point you can derive the amount of time left for the company to keep going without raising more funding
3. Revenue growth rate, and expense growth rate - this allows you to adjust 2
4. Status of next funding round - when, and which investors. Ask if the same investors will participate again in the next round of funding. Very very rough rule of thumb - if yes, company is doing ok. if no, something's up (with the exception of large growth rounds where smaller investors can't participate anyway)
5. Ask about liquidation preferences (so if there's a sale or exit, do investors get their equity share or at least 1x their money back (the higher of the two), or do they get a multiple of their money back (if that's greater than their equity share)
> 1. How many outstanding shares (including as yet un-granted option pool shares) - divide your grant by this number and you have your ownership share of the company
Proper term for this is FDSO (fully diluted shares outstanding).
I'd save the questions for the offer negotiation, but most of the equity questions are reasonable. I can understand someone not telling you the revenue/cost numbers, and that's where your due-diligence on the company/gut come in.
At Perfect Audience we told our potential hires this info at the time of giving them an offer sheet. It seemed only fair to let them know how the company was doing and how much money they stood to make from an acquisition.
At the time it seemed like the only fair approach. We founders honestly didn't know that most startups tell potential hires as little as possible about company finances.
Knowing what I know now, I'd still tell folks this info as it unwittingly gave us a hiring advantage over companies that don't.
The author is self aware and empathetic. But even if he wasn't or his natural inclination was not to become more kind, it's a really good thing to fake (and will hopefully become natural over time). Being kind is the right thing to do even if you're selfish/looking out only for yourself. A lot of really smart jerks are held back because other people don't want to work with them. Even if they're promoted for their individual contributions, they will always be limited by how much they individually can achieve vs. as a team.
1. Write down the problem
2. Think real hard
3. Write down the solution