Here is an essay version of my class notes from Class 6 of CS183: Startup. Errors and omissions are my own. Credit for good stuff is Peter’s entirely. This class was kind of a crash course in VC financing. I didn’t include all the examples since you can learn more about VC math elsewhere, e.g. here or here. As usual, though, I’ve tried to include all the key insights from the lecture.
CS183: Startup—Notes Essay—Thiel’s Law
I. Origins, Rules, Culture
Every company is different. But there are certain rules that you simply must follow when you start a business. A corollary of this is what some friends have (somewhat grandiosely) called Thiel’s law: A startup messed up at its foundation cannot be fixed.
Beginnings of things are very important. Beginnings are qualitatively different. Consider the origin of universe. Different things happened then than what we experience in everyday life. Or think about the origin of a country; it necessarily involves a great many elements that you do not see in the normal course of business. Here in the U.S., the Founders generally got a lot of things right. Some things they got quite wrong. But most of the time they can’t really be fixed. Alaska has 2 senators. So does California. So Alaska, despite having something like 1/50th of California’s population, has equal power in the Senate. Some say that’s a feature, not a bug. Whatever it is, we’re likely to be stuck with it as long as this country exists.
The insight that foundings are crucial is what is behind the Founders Fund name. Founders and founding moments are very important in determining what comes next for a given business. If you focus on the founding and get it right, you have a chance. If you don’t, you’ll be lucky at best, and probably not even that.
The importance of foundings is embedded in companies. Where there’s a debate or controversial claim at Google, one says, “The Founders have scientifically determined that x is true,” where x is his preferred position. If you think that certain perks should be extended since happy people are the most productive, you say that Larry and Sergey have already settled the matter. The point is that all the science is done at the founding. No new data can interfere with the founding moment.
Foundings are obviously temporal. But how long they last can be a hard question. The typical narrative contemplates a founding, first hires, and a first capital raise. But there’s an argument that the founding lasts a lot longer than that. The idea of going from 0 to 1—the idea of technology—parallels founding moments. The 1 to n of globalization, by contrast, parallels post-founding execution. It may be that the founding lasts so long as a company’s technical innovation continues. Founders should arguably stay in charge as long as the paradigm remains 0 to 1. Once the paradigm shifts to 1 to n, the founding is over. At that point, executives should execute.
There is, of course, a limit to how much you can do with rules. Things can and will break down even with perfect rules. There is no real chance of setting things up correctly such that the rest unfold easily. But you should still get the early stuff as right as possible.
“Frequently, you see women relegated to very traditional roles - I’ll build the robot, and you can be secretary for the group. Unless you’re very assertive, men can take over the group.” - Angela Bielefeldt, professor of civil and environmental engineering at the University of Colorado Bounder
Join us for a live chat tomorrow at noon as we make sense of some of these numbers:
+ In 2008, 41% college freshmen males planned to major in science and engineering vs. 30% for women.
+ Only 19% of software developers are women.
+ Only 5.5 percent of commercial patent-holders were women.
Curious to know your thoughts on this, Tumblr. Especially those of you in school. How’s the gender ratio in your majors? How, if at all, does the gap affect you?
This morning was a Terrible, No-Good, Very Bad Morning. I’m not going to go into the boring and depressing whys, but they include things like medical bills, the DMV and a rebelliously incontinent cat.
The problem with feeling depressed and out of control is that it is so, so easy to wrap those…
Mitt Romney will NOT REST until you eat a pastry. Here’s an excerpt of a Phil Rucker’s pool report from a flight between Charleston and Greenville Friday:
Before take off, Mitt Romney walked down the aisle with a large box of assorted pastries from Panera Bread to pass out to the passengers (including the governors and press).
What follows is a transcript of his exchanges.
“Come on, Kasie, dig in,” Romney said to Kasie Hunt of the Associated Press. “Pain au chocolat. Smart move.”
“Ashley?” Romney said to Ashley Parker of The New York Times.
“Can you just grab me something?” Parker asked, turning to her seatmate, Kasie Hunt, who was holding the tongs poised over the basket.
“What do you want though?” Romney asked.
“Um…” Parker said. “The popover thing?”
“The popovers?” Romney asked.
“Thank you very much,” Parker said.
“Sticky bun?” Romney asked other reporters. “There you go.”
“Snack time! Nothing? Just, you know, use your fingers,” Romney said, struggling with the big box. “The heck with this. There you go.”
“Come on, Emily, dig in here,” Romney said to Emily Friedman of ABC News. “Fingers are fine. We’re among friends.”
“Sarah, you want one? What do you want?” Romney said to Sarah Boxer of CBS News.
“I don’t know,” Boxer said. “What’s in there?”
“We’re gonna solve problem one here by getting rid of these ridiculous things here,” Romney said, handing two pairs of black plastic tongs to the flight attendant behind him.
“Rucker, come on Rucker,” Romney said to Philip Rucker of The Washington Post. “Oh, he makes a good move for the cheese. Take two.”
“No, no, no,” Rucker said.
“Look it, there’s so much in here,” Romney said. “Come in, take more. No, take more than one. Take two, take two, Ruck-man. Come on.”
“Where’d you get it?” Matt Viser of The Boston Globe asked Romney, referring to the pastries box.
“We found it on the floor up there,” Romney said.
“Do you want another one?” Romney asked Sara Murray of The Wall Street Journal.
“No, I’m good, but thank you,” Murray said.
“Who wants some more of these?” Romney said. “Look at this. This is good stuff. This is from Panera. Very high-end.”
“Pain au chocolat in there,” Romney continued. “Look at the sticky buns. Those are the best.”
“Hey, Rucker, there’s still some more of those cheese cake babies in here,” Romney continued. “No? You only had one of these. Come on, Ashley.”
“Alright,” Romney said. “We’ve got to get seated.”
“Look at the sticky buns. Those are the best”—amazing. (Photo: Charles Dharapak/AP)
This is a hilarious story, but I’m confused. When I studied journalism in college and was working as a journalist, our newsroom policies were all never to take anything from sources, including food. That’s not the case with the pros?
Those reporters’ employers are all giving tens of thousands of dollars a week, give or take, to the campaign just to be on the planes and the buses. Taking a pastry from a candidate is the least of the problems, if it can even be considered a problem at all.