Buried Reads for August 17, 2019

With YC application season coming up, I thought it would be fun to share some tips that can help. Check out our post on the Buried Reads blog.

Quick PSA on Hiring

I just celebrated 6 months of working at Quizlet, and I’ve been loving it. Quizlet helps people practice and master anything they’re trying to learn. Two thirds of US high school students use the app every month, and if you talk to anyone under 30 there’s a good chance they’ll tell you it saved their bacon in high school and college.

Our team at a recent karaoke outing during our offsite.

Since joining I’ve fallen in love with the culture. Everyone is caring, celebrates success, and knows what they’re doing when it comes to their craft. I’ve also been impressed by how fast the product and engineering teams turn the crank each sprint despite being a relatively large organization.

We’re hiring in product, engineering and recruiting across both San Francisco and Denver. If you are interested or know someone that is, email me directly and I am happy to jump on a call or connect you directly with the position’s hiring manager.


From the Operators

Joel Gascoigne of Buffer deserves a ton of credit for being one of the most transparent startup bloggers. This week, he shares his company’s experience diversifying into three products, and what MRR looks like overtime in Buffer’s Evolution and Expansion.

Tim Chen of NerdWallet sat down with the editors of First Round Review to share lessons learned from the first ten years of NerdWallet. The advice for CEOs that lands the strongest with me: after product market fit, the company itself is the product you work on as the CEO. They should resist the temptation to meddle in product by this point.

Neel Desail of ProfitWell pulls back the curtain on ProfitWell’s data set to show “How is CAC changing over time?” While his approach is a bit cooky, maybe Chamath Palihapitiya is right that Facebook and Google (along with San Francisco commercial real estate) are eating most of the VC money coming from Sand Hill Road.

Nathan Barry of ConvertKit just took a week off to learn to sail in the San Francisco Bay. His video is a fun, light-hearted way to spend 5 minutes this weekend.


From the Investors

Ali Hamed of CoVenture goes a layer deeper into the well-chronicled trend of companies staying private longer in What Will The People of 2040, Wish They Had Been Doing in 2019. He suggests that if Michael Milken were starting out as an investor today, he’d be creating a bond market for late stage startups. If you don’t know about Milken’s work on bonds during the 80s, he’s worth reading about.

Dave Kellogg of Host Analytics shares his advice to potential startup employees in Things to Avoid in Selecting an Executive-Level Job at a Software Startup. Those considering joining exec teams can save hundreds of hours of wasted time and grief with this post.

Jeffrey Carter of West Loop Ventures presages what will happen to Small Investors on The Capitalization Table after institutional investors lead bigger rounds. If you are a new angel investor (or have any on your own cap table), this is a great read to gain a better understanding of the pressures and challenges they face.

An Unofficial Guide to YC Applications

Image result for ycombinator logo

Startup accelerator Y Combinator is accepting applications until September 25th for the upcoming batch. Danielle and I went through YC in Summer of 2012, and since then we’ve helped review thousands of YC applications.

YC applications are confidential, so I won’t share any quotes, but I can share patterns I’ve found that work. I feel comfortable sharing them, because they aren’t a hack to sneak through the application process–they’re a hack to make your company more successful.

Communication

Founders find themselves communicating all the time: with customers, early investors, and employees. The best founders turn complex topics into simple ones. If you can’t explain what you do in a single sentence with no B.S., you’re doomed. The best founders work hard to reach mental clarity and cut through the noise to quickly explain any issue about their company. They are judged on whether they can explain what their company does, because they should have spent significant time thinking about, refining and explaining the company’s mission long before speaking to YC interviewers.

It’s telling that the H1 heading on airbnb.com is something a five year old could understand, “Book unique places to stay and things to do.” There’s no mention of buzzwords like “marketplace” or “platform.” The “What is your company going to make?” and video portion of the application should both provide something as clear and succinct.

(Airbnb has come a long way from the tagline “a friend, not a front desk” in 2008 — check out the original airbedandbreakfast.com website on the Internet Archive)

Customers

All founders are hopefully talking to customers and building a product to serve them. The best ones are maniacal about this though; they do it so intently and so often that they’ve started to learn what Peter Thiel calls secrets. In Thiel’s words a secret is “something important and unknown, something hard to do but doable.” Airbnb’s secret might be stated as, “it turns out people are willing to stay in someone’s guest room or on their couch, and the experience of meeting a host actually turns out to be magical.”

There is a question in the application, “What do you understand about your business that other companies in it just don’t get?” It’s a great place to share your secret. The best secrets don’t have to sound mysterious or shocking, but they should be something controversial. The Fortune 500 goliath you’ll someday be competing with would hear your secret and say, “No, you’re totally wrong the world doesn’t work that way,” but you will know something from talking to your customers that makes it right.

Convincing

Founders that make it through the gauntlet of challenges have to convince their first customer to sign on, convince dozens of investors to invest in them, and convince hundreds of employees to join them. If you’re not extraordinarily persuasive, you’re probably going to fail. Any investor worth their salt wants to see this in action, and YC is no exception.

One idea for how to show this: as soon as you explain your idea in the application video, anticipate the doubts someone watching will have. “Now you’re probably thinking this won’t work because __?” or “I know you’re already thinking, this is just another ___.” One way that founders overcome these objections is with clear cut data. “We know it’s working because we’ve already signed up 100 users this month, and they’re three times more engaged than our closest competitor and we do it for a tenth of the cost.” It doesn’t have to be exactly those metrics, but something that casts you as a standout in your industry.

Is that everything?

Definitely not! There are many other factors that matter. The strength and bond of your founding team is crucial. The clarity and succinctness of your pitch video is a huge factor. But if you do these three things well, you’ll be making a better business, and giving yourself a great shot at an interview with YC.

If you are applying or know someone that is, we’re happy to help you with your application or interview. Shoot us a Google Doc with your application at editor@buriedreads.com.

Shining your lighthouse

A few months back Danielle and I were at a happy hour with colleagues from work. Danielle and I had both recently joined the company through acquisition, and were just getting to know the engineers. One of the more introverted engineers struck up a conversation with Danielle. After chatting for quite a while, he said to her, “I should probably let you go talk to other people; I must be boring you.” She was taken aback, because the conversation had been fascinating to her. She said, “oh no, it’s actually really nice to talk to you, as I wasn’t really looking forward to the superficial conversations you usually get at an event like this. It’s a gift when an introvert shines their lighthouse on you.”

When she relayed the conversation, the thought of an introvert’s attention being akin to a lighthouse struck me. As an introvert myself, I kind of take it for granted that any conversation worth having is one worth focusing all my attention on. I sometimes forget that a lot of conversation for people is a bit like skipping a rock across water.

Since hearing the metaphor, I’ve made a point of having more conversations that go deeper. I am only realizing this year that’s sometimes a unique gift for the person you’re with.

My friend Andy and I were catching up on conversation dynamics, and started realizing you can think of each friendship having a sort of depth chart. Is this the kind of friend where you’re stuck at the surface and maybe only able to go a few feet deep. Or is this a friend where you regularly dive deep into what he calls the well of life. If you want to really run with the idea, you can think of depth in all kinds of dimensions. How philosophical a conversation is might be one dimension. How emotional or vulnerable it is are other alternatives.

Taking a more active role in steering relationships into interesting waters has been a fun adventure this year. I feel like I’m still just scratching the surface of what’s possible.


From the Operators

In Revenue Financing + Traditional Equity as the Future of Startup Funding, David Cummings of Atlanta Tech Village laments that there is “too much money is chasing too few high quality deals,” and proposes a model called revenue financing as a potential solution. While I think that’s a very valid option for many entrepreneurs, there’s a deep flaw in thinking only so many unicorns will start in a year. It’s at least conceivable that there are more great founders than ever, and more markets for them to enter than at any point in history.

From the Investors

Jason Lemkin of SaaStr illustrates why management teams that want to IPO someday have to get good at budget discipline in Zoom Had a Burn Rate Budget. So Should You.

It’s fairly common knowledge that negative net churn is a huge driver in SaaS businesses, Sammy Abdullah of Blossom Street Ventures explains the equivalent in ecommerce.

Jeffrey Carter of West Loop Ventures couches accounting as essentially a backward looking lens on a business, and draws the interesting parallel that really news media is not so different than accounting. I think it’s actually worse, and too much news intake is a sure fire way to over optimize fear circuits in your brain.

Reflections on Denver

Danielle has written two blog posts recently about our life after selling our startup and moving from San Francisco to Denver.

Building Your Life is the Creative Thing You’re Doing Right Now started to come to her after feeling a bit sad not to be building a new startup with some big ambitious idea. Our mutual friend Fawaz’s reaction became the title of the post. As someone who occasionally panics when I feel my own productive output isn’t far out ahead of consumption of things like media, his advice made me rethink how hard I am on myself.

This weekend, she also wrote and posted Post-Startup Life: Reflecting on My First 18 Months Living in Denver. She asked me after writing it, “did I share too much?” My thought is that most founders privately move on from these things despite lots of behind the scenes emotions and doubt. If more people wrote about their experience, more founders would understand their outcome or struggles are fairly common.

From the Investors

Om Malik of True Ventures wrote A Founder Metric That Matters. I’m a little more optimistic than he is that Dara Khosrowshahi uses Uber frequently. However, it was a gut check that I should use my own companies product more often.

Jason Lemkin of SaaStr answers What was your first meeting with an angel investor like? He ended up bungling it by asking for a steep valuation, and it’s a great reminder that understanding how your potential investors fund is structured is a great way to know how far you can stretch valuations or limit their ownership percentage.

From the Operators

Fred Wilson turned us on to the post A No B.S. Guide to Startup Stock Option Grants by Matt Cooper of Skillshare. It delivers on exactly what its title promises, and is on of the more detailed, explicit blog posts I’ve seen on the topic.

Living All the Decades

Sometime around 1999 I heard about a British television series called 7 Up. It got started in 1964, and the premise was to take a group of about twenty 7 year olds and interview them. They were asked what they wanted to be when they grew up, what they thought of the opposite sex, and what they thought about politics. The show was originally an exploration of the famous Aristotle, “Give me a child until he is 7 and I will show you the man.”

I was 21 by the time I heard about the series. I remember binge watching ages 7, 14, 21, 28 and 35. A few years later, I got to see 42 Up when it was accessible to American audiences. The show immediately gave me a preview of what was coming in life. I remember watching the first couple 42 year olds grappling with the death of their parents, and I knew “this too is coming for me.” And so when my mom passed away in 2009, it was certainly emotional, but the show somehow prepared me that this is a  universally human phenomenon and I wasn’t alone.

One of the theories I’ve since developed is that you can have a primitive form of time travel in life. You can play with Legos for an afternoon and be a kid again. You can go to a Van Morrison concert and live in your parents generation as a 50 or 60 year old. A trip to Vegas can be a bit like being a 20 year old in a fraternity or sorority. While it’s important to be your own age and live in the moment, it’s also true that at any given moment all the decades of life are accessible to you.

Watching 63 Up this week, and also seeing the popular appeal of FaceApp has got me thinking about Living All the Decades again this week. It’s fun to take an active role in balancing the portfolio of experiences you live in life.


Startup Links

Two great startup reads hit our radar since we last wrote.

Justin Kan of Atrium offers several helpful tips about Debugging Your Startup. None of the best practices are shocking, but when things aren’t clicking it’s helpful to have a checklist in front of you for the most likely things to consider.

Jamie McGurk of Andreessen Horowitz has a great post All About Direct Listings. For companies like Slack who don’t necessarily need the capital infusion, much less the headache of a roadshow, this is a route to have in your back pocket.

Non-biological stem cells

My friends know that I’m fond of using stem cells as a metaphor for cities, companies, and parts of your life. These are the blobs of opportunity you come across in life where it seems like anything is possible, and growth is bound to occur.

For example in Denver, the Rhino district seems to be where all the stem cells in the city are. It’s where most my coffee meetings end up, and it’s also home to several amazing murals. Companies can have whole departments that are stem cells, and sometimes the best way to recruit at a large company like Google or Twitter is to show that you’re the stem cells of the company; this is where all the exciting new potential is.

This week I have a great link to share with you about stem cells.


From the Operators

I did work last week on vacation to look at the most popular Buried Reads posts so far. You all are really interested in whether and how entrepreneurs can be good parents. This week Avni Patel Thompson of Poppy shares how impactful her family’s nanny has been. Read her post Can we please talk about the truth behind how we “do it all”?.

When I came across Adrienne Tran of Tesla tweeting about increasing optionality through specialties, it immediately made me think about the stem cell metaphor I mentioned above.


From the Investors

Sarah Tavel of Benchmark Capital has a great tweetstorm on becoming a VC. You can tell reading it she’s capturing several hard won lessons. Personally, the long feedback cycles she mentions are why I think angel investing will always play second fiddle to coding for me. I thrive too much on quick wins.

This week Jeff Bussgang of Flybridge Capital Partners published his Rocket Ship Startup List. If you just graduated/dropped out of college and want to get into startups, take a look at Jeff’s list. But also if you join a company and feel like you’re riding Apollo 1 not 11, take it as a chance to learn. Before shipping Windows 3.1 and Windows 95, Brad Silverberg worked on the failed Lisa project at Apple. Before Danielle joined Twilio as employee one, she was working at a company that struggled mightily to get customers. Sometimes the failing companies teach you painful lessons where the drive of “never again” propels you more than ever.

I try not to cover headline news here, since I figured you all get enough of that already. But this week Brad Feld of Foundry Group has a great view from in the trenches on how tariffs are affecting hardware startups.

Startups and Star Trek

Sarah A. Downey of Accomplice has been hosting a regular blog series called Startup Trek. It features a single blog post on each episode of Star Trek the Next Generation. Every post covers a lesson learned on startups.

Earlier this Winter Daniellle and I made a regular affair of watching Startup the Next Generation before falling asleep. We both loved the show. Danielle admires Picard’s principled integrity, and I think Data is a fascinating exploration of AI and emotion. So we’ve watched Startup Trek with delight, and I asked Sarah if she’d be willing to let me write on up a post on one of the episodes. She politely offered, and I was blown away.

I chose one of the climactic episodes of Season 1 where the security chief Tasha dies. It ends up being an exploration of nihilism. How does this relate to startups? See the post Startup trek episode 22: Skin of Evil to see what I think it means for founders.


From the Investors

Uber’s IPO is starting out with a wild ride, and for those who follow public offerings we highly recommend The Impact of Short Interest on the Performance of Tech Initial Public Offerings in the U.S. to provide helpful context on what to expect in the months leading up to the end of various lockup periods.

Struggling to put together a diverse panel, board, or recruiting strategy? HBCUvc’s List of Black, Latinx ‘Rising Stars In Venture Capital’ gives you the names, so now you have no excuse.

Sarah A. Downey of Accomplice who started Starutp Trek also wrote a great post this week on How to get a job in VC: the college student edition. She sums it up eloquently:

It’s not like a normal job function where there’s an ascending ladder of neat titles and constructed programs where you move up, like with investment banks or private equity firms that siphon up MBA students. Venture doesn’t really have that. Although some of the big firms might have associate programs, most don’t.

The number of jobs that come up annually is just a handful. There are roughly the same number of open U.S. professional athlete positions as there are available VC positions nationwide. And because of that scarcity, those jobs are always going to people who already have context around startups, their own deal flow, strong networks, unique talents, advisor or angel roles, or as many of the above as possible.

So how do you get a job in VC? It just kind of…happens. You don’t pick venture; venture picks you.

So You Think You’re Ready to Hire a Marketer? Read This First. It challenges the assumption that you need a marketer to launch, among many myths that cause founders to hire this role too early

How deep can a friendship go?

David Perell of North Star Media writes this week about The Fruits of Friendship. He quotes the late Irish Poet John O’Donahue:

When was the last time you had a great conversation? A conversation that wasn’t just two intersecting monologues, but when you overheard yourself saying things you never knew you knew, that you heard yourself receiving from somebody words that found places within you that you thought you had lost, and the sense of an ‘eventive’ conversation that brought the two of you into a different plane and then forthly, a conversation that continued to sing afterwards for weeks in your mind? Conversations like that are food and drink for the soul.

In this love, you are understood as you are without mask or pretension. The superficial and functional lies and half-truths of social acquaintance fall away… When you really feel understood, you feel free to release yourself into the trust and shelter of the other person’s soul… Love is the only light that can truly read the secret signature of the other person’s individuality and soul.

The O’Donahue passages are especially meaningful for me as I remember back to celebrating my 40th birthday a year ago. About two dozen of my friends joined me to celebrate, and it was gratifying to see how quickly so many friendships where we’d been out of touch for years picked right back up where they left off. Those conversations where you dive deep into life are so fulfilling.


From the Operators

Patrick Campbell of Price Intelligently shares the Lessons Learned from 3000 SaaS Companies. The amount of real customer discovery and learning going on in the industry is troublingly shallow.

Nathan Barry of ConvertKit debunks the myths that keep startup founders from pursuing revenue through traditional sales in Direct Sales for Bootstrapped SaaS Startups: from $1,300 to $725,000 MRR


From the Investors

Morgan Housel of Collaborative Fund is on a roll with his blog and writes this week about Degrees of Confidence. It’s a useful rubric enumerating the different degrees of confidence you could have on any given issue, and a great way to calibrate how much thought you’ve put into something.

Dave Kellogg of Host Analytics breaks down Highlights from the 1Q19 Fenwick & West Venture Capital Survey. Subsequent rounds are averaging 75% valuation increase from the previous round, which is lower than I would have expected. 9% of deals had a liquidation preference multiple, which is useful to know if you’re negotiating a round.

Matt Turck of FirstMark is curious about Bootstrapping as an avenue for founders, despite being a VC. Rather than trying to mete out pros and cons, he asks some good questions and puts together a list of several bootstrapped companies I didn’t know about.

Where are the weirdos hanging out?

Way back in 1993 as a teenager, I would go to the bookstore any chance I got to see what new book I could buy that would help me learn to program. I can still faintly remember seeing this weird magazine on the rack that delved into nerd culture.

Wired is ironically fairly tired today, but back in 1993 it felt like you were tapping into something completely novel. This turned out to be issue 3, back when they could only afford to publish every other month.

The thing that enraptured me was reading about MUDs. I was familiar with Bulletin Board Systems, but had never heard of the Internet. After reading about MUDs where you could be in a text based virtual world at the same time 40 other people were, I had to find out how to get online. Later that fall when my brother started college and got access, this was the first thing I tried to do. I remember spending countless hours MUD’ing the next year.

What didn’t catch my eye in that issue of Wired is their first write up of this new thing called the World Wide Web.

The write up doesn’t predict anything that grand, and says, “Today, W3 provides an eclectic collection of information including a database of poetry, documents from Project Gutenberg, computer algorithms from MIT, weather information, library catalogs, and a biochemical database.” Instead the ambitious predictions from that issues cover story were 500 channels we’d get from our cable provider.

I maybe should have paid more attention to the web than MUDs that year, but I caught on soon enough. What really strikes me reminiscing is how weird it was to be hooked on the Internet at that point. I don’t think I’ve come across anything in life that has ever felt such much energy and potential.

I’ve been asking friends lately, “Where do you notice weirdos right now?” It’s my way of trying to find the next thing with as much potential. Scenes that have captured so much attention that it rallies a clique around it. Answers so far range from nootropics to 30 year olds figuring out how to get frugal, and retire early. Maybe they’re tapping into early human computer brain interaction, or what it might be like to live in a post scarcity world.

Have you found a pocket of experience that seems weird, but might be big someday? What aspect of your life do you feel like you’re living in the future with?


What to do with competitors?

This week we’re trying something new: featuring a single post from a founder and VC. Each ultimately end up touching on how to handle competitors while drawing different conclusions. After reading both, you’ll probably arrive at your own more nuance answer.

Hiten Shah of FYI starts out with the bromide we often hear and too often forget, ‘Go talk to your customers lest you build something they don’t need.’ After fixing that, KISSMetrics exploded in growth, but ultimately ended up slowly losing. Shah tells the story of what went wrong after achieving product market fit in My Billion Dollar Mistake.

Sammy Abdullah of Blossom Street Ventures writes Stop worrying about your competitors, but goes on to elucidate some novel reasons why this is so misdirected. His piece is an excellent companion to Hiten’s post.

What if you had to pivot after your Series C?

This weeks posts include a stomach wrenching experience from CircleUp founder Ryan Caldbeck who writes, “I remember sweating a lot. I remember feeling a pit. I remember for the first few months after the start of the downturn always- *always* – feeling terrified. Imagine feeling like that for an entire day. I felt that way for months.”


But first we owe our readers an apology.

Last week, we featured a section on great interviewers with Charlie Rose as an example. Several of our readers were quick to point out that in November 2017 Charlie Rose was accused of harassing female co-workers throughout his career. We were completely unaware of this when we cited him, and apologize for picking such a terrible example. Rose has since apologized, acknowledging some of the claims and denying others, and upon review of the facts we believe his behavior is reprehensible. We are so disappointed to be let down by our former hero, and have completely removed him from last week’s post, and noted the change there.

Tyler Cowen, who we featured next to him, is a great interviewer. I feel bad to have put him next to the discredited Rose.

Our readers were also quick to point out there are several awesome female interviewers worth exploring: Mary Lousie Kelly, Soledan O’Brien, and Terry Gross.


From the Operators

Ryan Caldbeck of CircleUp expresses the dramatic ups and downs of pivoting his company in this tweetstorm.

Avni Patel Thompson of Poppy grapples with the question of how to start a startup without funding in Finding the space to take the risk and build as a parent with bills..

Jasper Diamond Nathaniel of formerly of Revere tells a cautionary tail for co-founders making compromises to mix their ideas together. 18 months later, he was left running the company without them, and figuring out what to do in When Your Startup Fails.

Danielle Morrill of GitLab (also co-editor of BuriedReads) continues to process the loss of her former startup, and the physical space it inhabited, as if it were a relationship in 564 Pacific Ave..

The Mattermark team inside 564 Pacific. (Thank you René, Samiur, Beau, Sarah, Josh, Evion, and Bryan)

From the Investors

Naval Ravikant of AngelList is on a roll this week with his podcast Labor and Capital Are Older Forms of Leverage. A huge reason I’ve always been interested in software as a career is because it has zero marginal cost to reproduce, and so it huge impact in the economy. Naval lays out how capital has similar power, but labor is counter intuitively one you have to be careful with.

Albert Wenger of Union Square Ventures writes this week about the “asymmetry of limited upside, unlimited downside” in Learning from Notre Dame.

Seth Levine of Foundry Group along with Brad Feld encouraged us to get audited fairly early on at Mattermark. Having 3 years of audited financials helps immesurably with M&A and other options you want to keep open. This week he covers How much should you be paying your auditor?.

Om Malik of True Ventures is getting skeptical of Amazon’s dominance in e-commerece. I’m skeptical from a different angle. Everyone in Silicon Valley seems to beelieve Amazon has taken the cloud computing market and will never be unseated. If you’ve used their console as a developer, you know they are confusing, have poor documentation, and can be difficult to use. Someone is going to eat their lunch, and if you think it could be your startup, we’d love to talk as potential angel investors.