Founder Fridays No. 50
Helping startup founders and operators scale smarter.
Happy Friday.
This week, for no particular reason, I’m featuring three articles from Y Combinator. In general, I think their content is thoughtful and based on a ton of experience. I hope it’s helpful.
Momentum and Fake Work
Momentum is everything in a startup. If you have momentum, you can survive most other problems. If you do not have momentum, nothing except getting momentum will solve your problems. It can be easy to lose momentum when you get distracted by fake work. Fake work is both easier and more fun than real work for many founders. Two particularly bad cases are raising money and getting personal press. When promising, founders fall in love with one or (usually) both of these, it nearly always ends badly. But the list of fake work is long. I tell founders to consider how directly a task relates to growing. Obviously, building and selling are the best. Things like hiring are also very high on the list; you will need to hire to sustain your growth rate at some point. Interviewing lots of lawyers has got to be near the bottom. During YC, we are ruthless about reminding startups that fake work does not count and will still get you a failed startup no matter how intensely you do it. So how can startups avoid this slump? Work on real work. Stay focused on building a product your users love and hitting your growth targets. Try to have a board and peers who will make you hold yourself accountable; don’t lose the sense of urgency. Sam Altman (6 minutes)
Pivot!
You might think that pivoting is something done only by the startups that don’t make it. In reality, a huge number of the best startups pivoted. In this video, YC partners discuss what a pivot is and when to consider a pivot, as well as their most favorite pivot stories. Did you know that Brex started as a VR headset company? Did you know that GOAT (the high end sneaker marketplace) started as a company that helped people meet over group dinners? Y Combinator (20 minutes)
1%
Y Combinator CEO Garry Tan joins Ed Ludlow for an interview on Bloomberg fresh off of their Summer 2023 startup batch retreat in the Bay Area. He shares his thoughts on the future of San Francisco as a tech hub, the rise of generative AI and the impact of Silicon Valley Bank on the startup ecosystem. He also drops this little tid-bit: YC received more than 24,000 applications and accepted 240 companies. So they have about a 1% acceptance rate. It’s a decent interview and worth watching. Bloomberg (12 minutes)
Founder FAQ: What Is the Right of First Refusal
The right of first refusal (ROFR) is a provision that allows a party (usually an investor or the company) to buy shares from shareholders before they sell them to an outside third party. With an ROFR, the holder of the right has the option, but not the obligation, to participate in any potential sale of company stock. ROFR agreements are common in startup financing. ROFR provisions benefit both the startup and the investor. For the startup, ROFR provisions provide protection against taking on random shareholders who may not share the same long-term vision for the company as the original investor. For the investor, ROFR agreements allow them to maintain their stake in the company and potentially increase it. ROFRs provide both parties with security and clarity, ensuring that everyone is on the same page when it comes to the sale of company stock. Westaway (5 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term by term and give you negotiation tips so that you can speak to investors with confidence.
Move Fast. Don’t Break Things.
Hi! I’m Kyle. This newsletter is my passion project. When I’m not writing, I run a law firm that helps startups move fast without breaking things. Most founders want a trusted legal partner, but they hate surprise legal bills. At Westaway, we take care of your startup’s legal needs for a flat, monthly fee so you can control your costs and focus on scaling your business. If you’re interested, let’s jump on a call to see if you’re a good fit for the firm. Click here to schedule a 1-on-1 call with me.
Post of the Week
The part about 'fake work' resonated for me – obsessive pursuit of funds often leads to obsessive pursuit of shiny things, like a nicer coffee machine or a fancy office. Would you agree?