YC SUS: Michael Seibel and Eric Migicovsky discuss How to Launch an MVP

Okay, we're live. Hi, my name is Eric. I'm the course facilitator at Startup School.

Hi, I'm Michael. I'm a partner at Y Combinator and a helper. Yeah, our volunteer today to help answer your questions. So thanks very much for joining in! We've got a bunch of questions that people asked about MVPs on the forum. We're planning to spend a couple of minutes just answering each one and really trying to dive in and give some advice tailored specifically to the startup.

So, let's do it!

Yeah, first question from Luke at Zeff Zephyrus. Zephyrus is an analytics platform for competitive gamers that provides users with game-specific tools and data to help analyze, track, and improve their performance. Well, let’s start with the one-liner. I thought it was pretty clear; I kind of knew what it was. I’m from the space—it's not the sexiest one-liner in the world—but it definitely accomplished the goal of me having a good picture.

Yeah, it does. I’m kind of nodding my head, and I understand where this is going. That's like a B- for sure.

Yeah, it currently is focused on Starcraft 2. Awesome! Consumers expect more than a scrappy MVP if there are existing products in the space.

• Advice for MVPs entering the space with existing developed competitors?

So, that was the funny bit because I felt like the first sentence in that should have been the paragraph—do consumers expect more than a scrappy MVP if there are other examples? That’s the question!

And the answer is hopefully no, because it’s a startup. Your ability to build more than a scrappy MVP is very challenging. I would say that if I go back to the Justin.tv days, if you can find a small population of people that have enough of a problem that the other folks aren’t solving, that they’re willing to use something that’s pretty bad, that’s a very good sign. If the only way you can find any group of users—even ten, even a hundred—who love you to have a very polished product, that’s not a good sign. That’s actually a good sign that the other folks are doing a really good job.

Yeah, that the products work.

So, one of the hacks that I like to use at this stage is to actually layer the MVP onto the existing product. For example, if there’s already some software that your users know, you’re like the people in the community are already using to track their competitive Starcraft 2 analysis, what you could consider doing is actually building, say, like a Chrome extension that sits on top of the other products and just overlays the extra data. Because you’re really, like, the goal of any good MVP is to test your hypothesis— is what you're making like important enough for people to care about? Like, will they actually care that you’re building it? And so you want to do that with the least amount of effort.

And if there are already existing good products, like it’s possible that you may find the users of those products pretty easily, and you can like build that little bit that’s special to you.

There you go!

Yeah, number two. Cool! Next up is from Plumbing at Flat Row. We automate billing, customer care, and maintenance for property managers.

Okay, the only thing that’s confusing to me is that I thought that property managers do billing, customer care, and maintenance. So, are you replacing property managers? Is it software for property managers?

Yeah, or is it like the billing of property managers?

Yeah, so maybe a bit of clarification. Maybe a bit. Like, I would probably just start off by saying we make software for property managers. We help them automate billing, customer care, and maintenance of their properties.

Something, yeah!

Yeah! If it’s a tool property managers are using to be more efficient, then be more clear in the upfront. And maybe even speaking to how much more efficient—does that mean the typical property manager can go from managing one property to five or from five to fifteen?

Yeah, like what’s the value prop that you’re offering to them?

Yeah, I’m not a property manager.

We didn’t get it right off, though. I mean, like, I can’t visualize the pain, though. I’m sure there’s ranges.

So we are currently starting with a few clients and are basically tailoring our service then.

Cool! How do we avoid the trap of making our service too specific? And how do we balance between the requirements of a few clients with the need to build a platform that is more universal?

So, I kind of think that, like, when I see a startup like this, I really have this basic question, which is: Are you going into this space with knowledge of the space? Like, were you a previous property manager? If so, you should have a lot of insights into the types of problems that are general that can be applied across the industry. And so, you should have a lot of insights on what your initial product should be.

If you’re coming into this with little personal experience, you think there’s an opportunity here, but you kind of don’t know what it is, I don’t know any—I think this is your problem. And like, I don’t know a clever way of avoiding it.

Just learning the business means you’re gonna be building a lot of features that probably are not generally applicable, and that’s the cost of learning about this business. So, in my mind, like if you already know about the business, use your gut! If someone asks you to build something that your experience tells you is not general, great! Don’t do it.

If not, consider the first five customers as you just getting an education on the industry and it might be a very expensive one. That’s fine!

For the case of someone who’s coming into the industry that they’re not already a participant of—some of the best founders that I’ve seen—they just immerse themselves in it. Like, for example, they may actually become absolutely managers. Like, they may volunteer or they just go and say, “I’m gonna help you run your business for like a week or two.” I think that would be great!

Yeah, even if—I mean, if you are a property manager yourself, you don’t necessarily have to do that because hopefully that’s—yeah, why we’re starting this company.

That seems like an even better offer than giving them software. It’d be like, “Hey, I’ll just do some of your work for you so I can learn.”

One of the things that I learned from kind of like to this—to this question of like how do you prioritize features—I always like try to, as I’m doing user interviews or talking to initial users, I really try to find pain points that people are already trying to solve.

So, for example, like if you’re talking to property managers and they’re totally comfortable doing all the books by themselves—they just have like their weekly like hour that they spend doing all this—that might not actually be the right place to start with.

Maybe you could start with like: are they actively experimenting and trying other tools? Have they tried like a competitor product? Those are usually the problems that I like to start with because like the person’s already trying to find a solution. So they’re primed when you come to talk to them to be excited and to try it versus you having to pitch them hard and like changing their entire business workflow or whatever.

Yeah, I think we see the opposite of a lot where somebody says, “If something's being undone on paper, there is a business in putting it into the computer.” And like, by nature of the fact that it’s being done on paper, you could build a billion-dollar company bringing it to the computer, and that’s actually not true. Like there are some things that are done on paper that are not broken—it’s like build it and they’ll come then.

Yeah!

Yeah, it really works.

All right, what’s next?

Okay, we're asking and answering questions from Sky, who has started Fridge Worthy. Let’s see, what’s Fridge Worthy?

Fridge Worthy—a social network where people share their accomplishments.

Well, sounds good for Ivy Leaguers! You mean like LinkedIn? People are using LinkedIn more as a social network, yeah.

Things were—they’re just an urban. I’m trying to see if there’s like a website.

No website?

Yeah, okay!

How do you launch an MVP of a user-generated content platform? If I make an MVP with minimal content, users will probably leave since there’s not too much to consume.

So, the classic answer to this is: one, does your platform have a lot of replay value? Is there any reason why I should come back daily or weekly? I think that’s a really important question to ask because even if you get a lot of people, if there’s no reason for them to come back, it doesn’t really matter.

I think, too, is there a smaller community that if that community was using a product they would find it useful, even if others weren’t? The classic, I guess now old, example of this was Facebook at Harvard. Like, as long as the Harvard kids were using it—or even a class, even just one of the grades in Harvard was using the product—it was useful. And so, therefore, they didn’t need to have millions of users day one; literally users of the order of like a couple thousand were very useful.

So the way I'd be thinking about this question is one—how frequent do I get value out of it? If it's not that frequent, is there any value in creating— is there a smaller population of people who can find this useful even if all our friends aren’t using it? And those people might use it, like have the problem or whatever on a more regular basis, so they’ll be like participating more.

So start with a focused smaller group. I think there’s always, you know, tricks of the trade—like generate them yourself! A lot of the best user-generated content networks—like 9gag, which is now this like massive meme website—was started by scraping memes from other sites. That’s not—that shouldn’t be something too crazy to think about. Reddit, same story in the early days.

So like in this case, if you’re talking like if you’re building a network for people sharing their accomplishments, you could look to where people are already sharing this and like prime it by grabbing the accomplishments. Like for example, if someone’s tweet—like if you’re trying to like get an someone who’s already on Twitter onto your platform, you could potentially like go through each person’s Twitter account and scrape the things that they’re proud of.

Crunchbase is actually an interesting example of this before people cared about their approach. The profiles on Crunchbase were built off media reports and so forth. And after a while, people cared about their profile and so they tried to keep it updated.

And when I’m thinking more about this problem, like it’s true—we have a lot, like one GitHub, we’re on like Dribbble, there are all these different platforms that people may participate in. So that’s us. I mean, that’s a service right there!

Like, how to generate your own page?

Yeah, cool! Next up, Dennis at Swish Swish Swish Swish Technologies. We’re building the self-driving cars for ride-sharing and retirement communities and for schools in the US.

Okay, so I’m imagining like club cars or whatever.

Got down! Please share some of your advice for founders like us with a product that can take a very long time to launch. How do we get users even before we launch? How can we generate sales even before we launch?

So I deal with a lot of companies, you’ve seen a lot of this. We have like 25 companies that are all working their way through the FDA process and we’ve also funded a lot of like supersonic aircraft companies that will probably take a little while for launch. So this is like this hands-on—I mean, Guardian self-driving car companies in fact probably follow this exact idea.

Yeah, so there are a couple different ways that you can go with this. I’d say that in areas where there’s like the possibility for harm or there are like safety concerns, you have to be extremely careful about what you consider an MVP in any way that can actively harm somebody.

So, that having been said, we have had companies test smaller versions of what they’re like; smaller versions of their larger vision with kind of off-the-shelf technology. Some of the best hardware companies that I’ve worked with—even though they now make their own hardware and they build a bunch of custom stuff—they started using off-the-shelf systems like Raspberry Pis, cameras, just existing technology and put them together in interesting, kind of normal ways.

So in this case, like there is now more and more kind of off-the-shelf tech that you could use to craft together a rudimentary self-driving car.

I think we're getting back to, I guess, like why we work on MVPs. One reason we do is to actually validate that people want this. The second reason we work on MVPs is to demonstrate that we as founders have the skills and capabilities to like take the problem from just an idea to an actual implementation—even if that implementation is not the long vision of this.

So in this case, it’s very easy to have the idea to say, “I want to build like a self-driving car or something like that,” but there’s like a huge gap—a huge discrete bump—between people who have the idea for a self-driving car and people who have like built something that resembles it.

So in this case, like building something that demonstrates your capability could separate you dramatically from the pack. So we've had companies that are now off building like Embark, which builds self-driving trucks. Like literally they're running on the streets and the highways in Nevada—they started with a cop car.

Yeah, I think like at demo day, they had a golf cart that they rigged up with like six cameras. I don’t even know if it was autonomous; it might have just been remotely driven or something like that.

There’s a great comic on how to build an MVP, and it literally is someone building a car, but the first step is building like a skateboard, and then you build a bicycle, and then you build a car. So you can apply the same logic here that like if you’re trying to figure out how to build something that’s autonomous, that works in these communities, maybe you start with like an autonomous wheelchair, right?

Like you just create—like one of those personal mover things—right? You start with that, and it still kind of accomplishes the first—the overall goal of making something that’s for retirement communities, for example, but much safer, much cheaper. And that actually sounds like kind of a cool idea!

Maybe!

Segen or not at all!

The couple of parts of this question: How do we generate sales before we launch?

I actually think that is—sales are hard. Generating letters of intent or agreements to pilot shouldn’t be very hard if there’s a lot of demand for this sort of thing. So being able just to get your customer to sign anything—even if it doesn’t have a price on it—is evidence that you can sell to an investor and is often seen as more valuable than not having it.

So some other things that people have done in this way is, if your plan is to sell cars, maybe the first thing you do is sell the service. So, you don’t have—you don’t have autonomous self-driving cars yet, but you do have yourself!

So what if you ran a car sharing service in this retirement community to start? That would demonstrate to people that, you know, there are people who want to use smartphones to like request cars—not kind of thing. And you could literally get started like tomorrow doing that potentially!

All right, what’s next?

We’ve got Ethan at Volley Word. Volley—we facilitate the servicing of users’ vehicles; they do not need to leave the home or office servicing.

That seems like an awkward way of saying we’re a car mechanic that’s—yeah, anywhere you are.

I think this is a perfect example of like the description requiring examples, because servicing does not put a picture in my head as opposed to refueling, changing the tires, doing an annual check-up—all those things create pictures in my head. And also, there’s probably something that you’re starting with; I imagine that you’re not like servicing every end-to-end thing in the car to start.

So, some of the best pitches, like Michael said, they cause you to visualize what the service does.

But here’s actually a problem that a lot of founders run into: they think that their one-liner or their short description has to encompass like everything that they’ll ever do under the sun. Because they think that like investors will only get excited by these like big dreams; but in reality, like we’re actually just trying to understand what your company is so that we could talk about something else.

And so your description doesn’t need to be this all-encompassing future vision—it’s just like we won’t. I know what you do quickly; like get to the next step!

While getting all of the legal taken care of to protect from liability.

So Ethan, the first question I would ask you before you even think about this is: have you studied every startup that has failed trying to do this idea, and do you understand why?

If not, you are doomed to repeat their failure.

So you can start by looking in the YC database; we have funded this!

So, I really think that the real number one question is: do you understand something that everyone else doesn’t know about this space?

The other thing that I think is tricky is that like the population that has the most problem with their cars tends to also be in a population that is extremely price-sensitive about fixing their cars. So make sure that you have some insight on how you can be offering the cheapest option, because if you’re— if you’re the kind of issue here, is a lot of people like to go with luxury and high price first, but the problem is like you’re solving like car braking, which is way less common if I bought it a year ago.

And so make sure that you’re actually letting this up so you actually have a product that can have demand.

Oh yes, we’ve seen in other countries as well!

Yes.

Say, in terms of the liability question—like you gotta be extremely careful, especially when you’re dealing with like large expensive items that people care about.

The way that I like to think about this is, you know, trust your gut! You’re usually not gonna make—you’re usually not gonna try to put yourself in a position where you’re taking too much risk, naturally! So like listen to yourself and listen to other people when they bring up problems that you think you might encounter.

All right!

Okay, this one’s okay. Can you pronounce that one?

No! Are we doing high-five or this—oh!

Being stopped! Gonna stop—Louis! Louis! Okay, Louis!

We’re Beanstalk. We build a home wellness service and products marketplace for people’s wellness objectives.

Okay, no idea! I don’t really know what they do!

Home wellness? I think I’m like thinking of a home gym!

I’m telling you, I don’t even want to stretch my mind to try to figure out what emotions because it’s so much jargon!

It is a unique name!

Let’s see if the website has anything more.

Didn’t step—oh, no—is it Be Honest Dennis?

Being a step—okay—services for your well-being at home.

What kind of services? What kind of services?

Quest!

Oh, exercises! Meditation!

When you say like, yeah—like your description on your front page is much better than—I don’t know what to—so that, okay, back to the question.

Great! Should we launch our MVP for free, or is it better to charge people?

Let’s be clear; you have a service where you’re actually—like there is real cost, meaning like your service is helping someone exercise. There is cost to sending someone to that place, there are costs recruiting them; there’s a cost to their time.

In any situation where you actually have real cost, you should be charging from day one.

In a pure software play where you don’t have any costs, maybe consider something that’s freemium.

But like you don’t want to anchor—like the number one thing with these like marketplaces that are actually moving humans around is that if you can do a situation where you’re providing a dollar with a value and you’re only getting 75 cents, that sets back—you’re gonna get a lot of demand, but you’re gonna lose a lot of money.

And when you actually equalize the demand and the price, you’ll lose a lot of customers. Especially for something like this where it’s an existing service that people are already buying from other vendors.

Yeah, so you kind of don’t need to validate that like people want to have yoga classes or people want to have dance classes; what you want to validate is, do they want to have them at their home?

Like that’s the thing that’s kind of new and I think unique about this.

So like definitely, definitely charge for it.

Yeah, I think just charge a lot! Charge more than you might feel comfortable so you can identify the people who are most desperate for it!

Here’s your crazy idea: Charge more than the existing solutions! Because like when I think about it, if I’m like, “I want to have a private yoga class that’s expensive!” I would have to schlep out to go to the studio!

And I’m having it at home!

Yeah, I mean, and that would actually—charging more sounds a little bit weird, but it would like force— it would really force the question of, “Are you building something that people really want?”

You would get an answer really quickly if you were charging more than like the neighborhood yoga studio, and people are still coming to you—then you’re really on to something!

If like you’re constantly having to cut the price and like, you know, run discounts and stuff like that, like maybe they’re only coming to you because it’s slightly cheaper than the alternative.

So, there you go!

Yeah! Okay, now we're onto high five!

High five is a local news website that helps you get invited to activities based on topics you enjoy discussing.

We help people in their 20s and 30s meet new friends with similar hobbies, humor, and lifestyle!

That sounds like two one-liners in one!

Or three!

Or three!

Yeah!

So once again, Vlad, something that a lot of people have tried before is both local news and interest-based social networks and dating and meeting new people.

Yeah!

So like, make sure that you’re studying those products and you have a strong opinion about why they suck.

It's gonna help you!

Two reasons: one, it’ll help you figure out what to make is a good product, and two, a very common investor question if you ever want to raise money is, “Well, what about this?” Everyone’s always heard of like the other app that they funded—they may have funded like five of them—yeah, and if your answer is like, “Oh, I don’t know,” then instantly you lose credibility.

So make sure you’re an expert on all of these various things. My hunch here is that Vlad, this might actually be a problem that you’re solving for yourself, which is great!

Like maybe you just moved to a new city and like you’re experiencing this exact problem, so like—or yeah, or your friend has.

So like the way that I would start building an MVP is kind of like what we mentioned at the beginning. It's taking what you already do on a regular basis—like maybe you go to meetups, maybe you like read it for the subreddit event of that city—and like think clearly about like what are you doing today and what’s the smallest thing that you could do that has an outsized impact.

Like you want to—you want to add the least amount of new kind of like process to your weekly workflow that just has this like outsized large impact!

All right!

Okay, what do you do after you launch an MVP? Exciting!

Okay, next up we got Akees from Small Scope. What are some steps to launch an MVP that found? What are some steps after launch of an MVP that founders should follow?

In the video, there are some examples of successful companies’ MVPs; however, there’s no discussion at all on how they iterated what they learned, and why they narrowed it down to those features.

So Peter from Segment Donahoe actually had a talk at Y Combinator this week on this subject, which I think is really interesting!

So, we started with like this depressing fact: most startups are in the process of dying.

And that’s a depressing fact!

One and depressing fact two is that most startups have convinced themselves that they’re right on the verge of product market fit. One of the fact is, they’re actually in the process of dying.

So if you set that as the like environment that you live in, one of the things he said that I thought was really helpful is: take your MVP and be a skeptic!

Have someone in your company be dyspeptic and basically ask the question, “Is this providing any value to my users?”

And not like, “Oh well, you know, if I built these 17 features, then it would…”

Is my first MVP what the service that I could write people today? Is it providing any value to my users?

Then if the answer is no, go figure out who’s in so much pain around this problem that they would use your MVP, and get them to use it!

And then ask that question again: Am I providing any value to those users?

It turns out that like it’s too easy to go down a track where step one you’re not providing any value, and just to make it so that iteration one, you’re providing no value; iteration two, you’re providing no value; iteration three, you’re providing value.

If your product—if your problem you’re solving is severe enough, there should be some group of people who are willing to use a really bad product to help solve it!

And so go find them!

That’s where I think the best folks that do MVPs and what they do is they literally take what they have to and they talk to different groups of users, and they begin to kind of instead of iterating on the product—like building more features—they actually iterate on the market!

Yeah, so they’ll find like, I mean it’s always a great example, but Superhuman—the founder of Superhuman wrote a great blog post on how you iterate towards product market fit.

And one of the things that he talks about is looking at like the demographics within the first hundred users and he realized that like founders, salespeople were really like taking advantage of the basic features that Superhuman had, and then like product managers and some of the people who didn’t like deal with email on the same volume just did not get value and stopped like using it.

Another test to kind of your point of like do people benefit from this very first version—one like kind of crazy out there test that I sometimes seen people run is they kind of—they turn off their product and they see how the complaints—like you don’t really have to do this, but you could kind of figure out ways to simulate this!

So for example, if you had an outage—if your servers went down like last week, look back at your email logs to see like did anyone care? Did anyone care?

So you might already have run this experiment by accident at some point! It’s a perfect example of doing something that doesn’t scale.

Like a big company could never do that!

And awesome, a small startup like—I mean Reddit did that from—yeah! I mean Twitter did too, but like a small startup, but something you totally can do.

And if you think about the environment as like the greatest percentage chance of what I’m doing is death, then you should be willing to experiment with extreme things fairly with death!

Yeah, that’s weird!

All right, that’s next!

I do remember a lot of failed wills, funds, whatever else, and I always complained like whenever Reddit would go down, I would complain to my friends when we were trying to like—oh yeah, router.

Where I would text Eve—it would be funny—I’d be like Steve, your website’s down!

I’m sure I’m the first person who’s telling you!

Like that’s a massive sign that you’re onto something if like people can’t live without your website for like five minutes?

Yep, got something!

Yeah, next up from Posh.

Wow, my company's our website for shopping from home base and small businesses around us.

After evaluating what I do, I’ve realized that I have a small—I have—I have users’ interaction that we do not have product market fit.

Now the question is, should I continue working on this, especially since margins are thin, or should I quit this and begin in and search for market product market fit?

You know, I think this is always the hardest question to answer because I see problems on both sides. There’s a set of founders who if they don’t succeed immediately, their mental model is that their company’s a failure.

But then there’s also a set of founders who even after learning two years' worth of horrible facts, they still like will not acknowledge that it’s not working.

I think the best strategy for this—the one that’s easiest to execute—is to time-bound it. So what I would say is like, “Hey, we’re gonna try everything as hard as possible to make this work for this period of time,” probably no less than six months.

And if we haven’t figured it out, then we’re gonna be open ourselves up to pivoting!

I find it’s easier to time-bound it because like it’s easier to be intellectually honest with yourself about like, “Have I worked on this really hard for six months versus three?”

Versus have I tried all of my ideas?

Like that’s a—look at there running out of ideas then!

Yeah!

Yeah, like ideas— they’re kind of thing!

It’s easy to trick yourself that you’ve tried all of your ideas; it’s not easy to trick yourself, “Have I been working on this for six months?”

So some strategies that you can use during that six months are like put all the ideas that you still have up on a whiteboard and like pick the top one and spend a week working really hard on that!

Because it’s possible that like you’ve been going through this for, you know, a couple months or a year and you’ve gotten into this setup where you think you’ve tried everything or you’re not sure about a specific question that you might have—like, am I going after a demographic? Am I using the right stores or small businesses on my platform?

And you could test it!

You say like, “Actually, we don’t have product market fit.”

The founder of TaskRabbit was just speaking last night and she was talking about how like different—that first—every single everything like TaskRabbit—you could just do anything!

Yeah!

But then they started realizing that like some people who really just wanted Ikea furniture set up!

And so one of the things that she said that she was looking back and she was like, “I wish we tried this at the beginning!”

Was saying, “What if we just made like a landing page that was just like, ‘Get your Ikea furniture set up!’”

And so I could imagine something like this really like forcing that issue!

And the cool thing about that is you can do that in a week!

Yeah! Like, you already have built all the framework for it; you could spin up a landing page that’s like, “I wanted my hypothesis is that people really want to buy, you know, baby stuff on like a really short-term basis because they can’t run out and get it.”

So I’m gonna use my existing website and the existing like whole thing that I’ve built and just test that one demographic with one use case!

And then, when to quit and start the search over again?

What did Peter say about that? Because he did like—they certainly—I think Peter said that like if you can convince the critic in the company, but basically he was like, “Identify a critic in the company; identify a sign that would even convince the critic that there’s something here.”

If you can’t hit that sign within a period of time, you should move!

So like don’t trust the faith of the optimist—like try to assume the pessimist role and like try to come up with an objective measure of like, “Yeah, next person would be like, ‘Holy!’”

Yeah, even the skeptic would be like, “Yeah, okay, I guess we have to work on this.”

Like that’s what you’re looking for!

And like for him, he tells a story at Segment, which is really cool, which was that the idea of Segment, he didn’t believe in, and his co-founder did.

And his test was like, “Well, okay, put it on Hacker News; let’s see what like engineers think!”

And he thought it was like—he was just gonna not get any upvotes and move on to the next topic, and the next day, it’s from an age of Hacker News!

And he was like, “Oh crap! Even as a skeptic, I must acknowledge that like there’s way more demand for this than I ever thought.”

Like that is a good mental framework!

You have to get yourself out of tricking yourself that it’s working when it’s not!

Next up, Crystal at Sidefold. Along our journey, we've done surveys, interviews, and had many conversations with users.

Once the MVP is live, and we invite users to use and test our tool, what are the top methods you recommend for capturing and measuring feedback?

I often think that startups try to scale this effort way too fast. The things that I’ve seen work really well are, you call the users yourself personally, you invite the users to your office, you host a dinner for your users, you put your initial users in a WhatsApp group that you can all talk with together!

But like, things that absolutely don’t scale!

Another famous one was Airbnb, where customer service was one of the co-founders Joe’s cell phone number!

Like this is the perfect area where like you want there to be so much information flow from the customers to you that like you have to do things that don’t scale.

You shouldn’t be thinking about, “Oh, how do I get my ideal Intercom setup and my Zendesk set up in the other days?” You do not need that stuff!

But let me unpack something there because it’s easy to overlook. I think why we talk about doing things that don’t scale—the reason in this case is actually you don’t know the questions to ask yet!

And so you want a really high bandwidth—a really wide, broad way of collecting feedback because you don’t know the questions that you want to ask it.

And so by having this like open-ended—like the example there may be very cool because they’re literally just like talking—like actually talking to users that have problems!

So you could ask questions like when they when they phone up and say like, “Hey, like take him to my Airbnb, you solve that.”

And then while they’re on the phone, you say like, “Oh, by the way, how did you find us? How’s your experience so far? Your friends? You like?”

You basically can like pack the system, and instead of having to create like the perfect survey, the perfect—you just like talk!

My recommendation is to write that all down and maybe on like a weekly basis get together with you and your co-founders, kind of debrief about these conversations that you have!

Because like some of the times during office hours, I really like talking to founders that have had these conversations and we just kind of just talked through, I’m like, “Tell me about like this user’s background. Like where do they work? How do they—?”

And sometimes you can pull interesting insights out of this that can help you like tune and tweak your MVP to basically like kind of—to the point that we were talking about before about these like experiments that you can run, you could say like, “Well, actually a lot of you know, singles are using this tool and I’ve talked to like three of them; maybe we could like try something that just goes after this demo.”

Yeah!

Next up, MVP as part of your startup pitch!

Well, let’s see what Spencer has to say from Spencer at Carnuba!

Carnuba—the first online back office and field service management platform for independent car care professionals!

Wow, that is a mouthful!

And you say mechanics, detailers, etc. Field service management platform is jargon! That’s something that probably they understand in a normal investor will not independent—I’m imagining like awesome one-off mechanic!

Yeah! I don't know what’s good!

Like a nutburger professional either!

Okay, here’s what I think you do: You write software for mechanic shops and it helps them manage dinner.

They like—what places the paper with them?

Yeah, I’m still not totally—

All right!

So that’s the question—we're end goal is to build an online marketplace to connect car owners with local independent car care professionals and get it to go chains.

But our MVP is the back office—a pure service management platform to build up our supply side of the marketplace.

Should we be pitching to our investors our end goals or what we’re working on now?

Classic question!

So here’s how I would probably structure the pitch: Step one—what you’re working on now. Step two—the traction. Step three—the business model. And then step four—the vision.

It’s a lot easier to sell me if I know what the hell's going on in those first three!

Now I kind of know, okay, this is what you’re doing today; I have a base of knowledge.

So I can basically—when you tell me the vision, I have context enough to how where you are today connects with the vision.

If you just send me the vision, I’m gonna be very confused.

That you know—if you’re saying this marketplace, I’m imagining, “Why don’t you just build the marketplace today?” and then like, “Oh actually we’re doing this B2B product now!”

I’m just confused.

So start with what you’re doing today, then talk about the vision. Here’s another reason why I really like confounders do that!

Is I can evaluate like I’m mostly at this early stage. I’m mostly just trying to like understand you and like are you cool? Are you like—you’re smart? Have you figured out a pain point?

And by sharing like what you’re doing and some—but if you just talk about this vision, I have no like metrics to evaluate you!

You know, if you pitch your short—if you pitch your short-term goal, I can say like what you’re like every part of the way! There's no way there!

If you pitch this like take over the world vision, you're like “No winner!”

Yeah, I just can’t really differentiate—like are you a poser or you just like talking a big idea thing where are you actually getting deliver on this?

Oh no!

Let’s do some YouTube questions—see how this goes!

Autumn at jump dot IO asks—my name is Autumn and my business is a barter service that connects startup entrepreneurs with one another.

Okay, bartering?

Okay! I’m thinking back to the barter system.

Once again, no pictures!

Yeah, maybe like an Olympic training? Are they trading desks, or are they trading computers?

The trading service providers—softwares—no idea!

In consideration of getting an MVP up as soon as possible, what are the pros and cons of using white label services?

So this is a good—this really brings up kind of a classic thing.

So I would say a couple things to this point: one, if you’re just trying to test any demand at all and a white label service between like lets you do that, great!

But I’d argue that like if you want to test any demand at all for this type of product, probably like a Google spreadsheet could do it too!

And so if you’re just looking to test is there any demand, like go as simple as possible!

If you have seen demand and you’re thinking to yourself, “Okay, I want to make this a company”—if you want to make it a software company that can scale, that can raise money, it’s a lot easier if you’re building your own software.

What’s an exit? Vivek at Fleet Code asks, says Fleet Co provides a business assistant for transport and logistics companies which helps business owners to know how much their vehicles are making and profit and loss.

Oh, I don’t know what a business assistant is!

Is that like my consultant? Is it an analyst?

It sounds like an Indian-specific thing potentially.

So oftentimes like we, you know, are investing a lot in India right now, and I think one of the things that I’m learning is that there are certain different, like just different facts in the Indian market.

But as someone who lives in San Francisco, I can’t like visualize that as much.

So some of the best Indian fakirs, they actually like spend maybe like a sentence or two bringing me up to speed on what's happening in their market!

So that’s a question about pricing—yeah, and so the same answers we get before: price expensively!

Make it so that you have a high bar for delivering great value and that you have a good verification that the person has a lot of pain!

It’s more often that people price underprice than overprice!

So lean towards overpricing again; it forces the issue!

See what else we got!

Let’s do this one!

Okay!

Okay. Deb Food is an e-learning platform to help people learn software development.

Okay, we've already launched our MVP! It’s basically a publication—text plus YouTube. We get about a thousand users on our channel monthly. Shall we focus on building new features and innovations or should we go after currently implemented revenue sources—like subscription?

Court!

Oh, okay!

So should we start charging for things that we’re already offering or should we build new free features?

This is a tricky one because it really goes to like what your current situation is.

AKA do you need money?

Look at how big of a startup you're looking to build. If you’re looking at with a lifestyle business, then like I would definitely charge right now, and kind of what your vision of what the product should be.

And so like this one’s hard to answer just straight away! If you’re thinking, “Oh, I don’t need this to be a venture scale business; I want it to be something I can do with all my time so it needs to make money so I can quit my job”—then charge great!

If you’re thinking like, “Oh, I’m looking to build a free product for teaching people to learn software development because I want to monetize it in this other way,” then I’m not so sure.

And then in terms of building new features, like that’s a question for your users! Like what do your users want? What are they—how are they frustrated with your product today?

I mean you’re also looking at engagement like are people coming back and using your service on a regular basis?

We often get questions like this that basically ask us for product insights when we’re not the customer!

And like be very careful about asking any startup person who’s not your customer for customer insight because they won’t have them!

It's a great point!

Yeah, and but they’ll offer them!

They will!

Yes!

A bunch of recommendations that are based on—

Okay, now we’re actually—we’re gonna get ready to the YouTube comments!

Oh, here’s a good one—how do you deal with co-founders’ conflict with regards to company direction?

So, that’s never easy!

Yeah, I think that step one is to have the conversation in a respectful way.

I think oftentimes what happens is that people avoid this conversation until it becomes so problematic that it causes a founder breakup.

And in the early days, just people being heard and conflict being heard actually helps to spell it so that would be my first step.

I think step two is—we talked about kind of time bounding and dealing with the skeptics.

Let’s say that your co-founder becomes a skeptic, ask him, “Okay, what’s the test that would prove that the direction we’re going in right now is a good one?”

And what is the time period that we can all agree to go after that?

And then BAM! We’re running an experiment!

Now if we don’t make it, we’ll switch!

If we do, well, you’ll change your mind!

Much is your way to—once you’re having a conversation and kind of structure that way as opposed to like, “You have to listen to me because I’m the product guy” or “I’m the CEO!”

That really works well!

You give this piece of advice at the beginning of YC that I really like which is to get all the co-founders together in a room and plan the week, or two to plan your two-week sprint and then to ask everyone to put their ideas on the whiteboard!

All ideas go up there!

Like you don’t—you don’t start like deleting ideas at this point, and then you like—once the ideas are up, then you prioritize!

I think too often, especially like developers, we’re already internalizing like how difficult things are gonna be to build when we might not have understood like the potential benefit from building this!

And it’s always a trade-off!

So like go broad! Think—think of what—think of like entertain the idea of what you can build, and then filter it then.

And kind of like prioritize the list rather than just like preemptively shooting down ideas!

Yeah!

Brainstorms turn into shooting down ideas so fast!

Yeah!

Oh God!

That’s more pricing questions!

Hard tech because at the bottom of the list— No, I’m just looking through to see which one—I was like, okay, here we go!

Elias asks: How should I talk to my first B2B customers to let them know that I want them to sell but also that they are part of like a beta test?

So this is a fun one!

I always think—and a lot of times, founders ask these questions where it’s basically like the answer is just to be honest!

Right?

Like, or the answer is you can just ask!

Right?

And this comes up with investment car investor conversations and customer conversations, right?

You’re looking for early customers who are excited by the opportunity to work really closely with the founder, be able to give feedback quickly, to be able to get changes fit quickly, and it’s not intimidated by something that’s actually a feature!

Yeah!

But a lot of customers—that’s like, they would pay more for that!

Yeah!

And so you’re looking for that customer!

So be upfront about it!

And it’s same thing with the investor!

Really like a lot of times we get asks a question like, "What did the investor mean by this?" or "What stage of the process am I in?"—and the answer is like just ask the investor!

I think like it actually shows a level of sophistication to ask the question when you don’t know as opposed to just kind of like not, as if you do know and not and then leave without any insights.

And the failure mode here is if you don’t bring this up now and you just like present yourself as this big enterprise software company, like they’re gonna be disappointed; you’re gonna be disappointed; like everyone’s gonna have a not-fun time!

So spin it in a positive!

Yeah!

Like it’s—it’s! Again, you might even close the deal because you bring this up!

Maybe don’t call it a beta test—just say like, “I’m gonna work extremely closely with you to make this a success!

Like I’m gonna—I’ll be awake 24/7 making this work because you will be awake 24/7!”

All right!

What else?

Here we go!

Oscar says we’re Blue, a platform where housewives resell products from suppliers using WhatsApp.

It’s like, "Me Show" for let him get that!

Should we give incentives to our housewives to trust us like Uber did at the beginning?

So, um, interestingly enough, this is a common thing that happens where a startup thinks they know what happened at the beginning of a company, and sometimes they don’t!

So in the extreme beginning of Uber, what’s so interesting was that it launched in San Francisco, and it launched as Uber Black, which is a really expensive product, actually!

It wasn’t well subsidized, and the real value is that it was impossible to get a taxi in San Francisco!

Absolutely impossible!

So they didn’t have to incentivize people to use the first version very much because like the alternative was like you couldn’t move around the city at all!

Now, as they expand to new markets, and they figured out how marketing worked, and they figured out that like they could accelerate penetrating into a new city if they gave away rewards—that was all stuff they did later!

Much like, yes, we don’t copy what you think someone did in the beginning when actually that wasn’t what they did in the beginning!

In the beginning, they solved a really hilarious pain point!

And if Uber had launched in New York City, it wouldn’t have worked, because like—yeah, it did not exist in New York City!

The pain was so great in San Francisco that everyone was willing to use Uber Black!

Like they turned a lot of it, it’s such a money!

So they did the exact thing that in charge way too much and they found like a very specific pain point that like certain very wealthy people had!

I remember the first time I got an Uber—that was, yeah, it was good!

I felt like for like a king!

They had a limo in their first initial fleet!

And every once in a while you recall Uber and like a stretch limo would come and pick you up!

Yeah!

Like, two people—it was crazy!

They charged you for—charged extra for the excellent idea, but it was expensive!

Okay!

Okay, this is a really important question!

Ashly asks: If we’re gonna be—if we’re starting a technology service that has never been done before, is it important to get it patented before we release the MVP?

And I have—I have some ideas on this, but I want to hear only your—I usually abstain far away from my PMS!

It’s a buyout company, but you have more experience than I do!

This is such like—like I—I started my company and, you know, a small town in Ontario just outside of Toronto!

Like I was not in the thick of the startup world!

And I’m trying to think back to like how many people told me to patent that!

Yeah!

This is like one of those things that people who are not in the startup world think is a critical piece of starting a business because they may have heard of like someone else who got screwed out of their idea or something like that!

But if you’re starting a startup, which is kind of defined as a technology company that’s designed to grow rapidly, then the number one thing that you need to do is find something that people want and sell it to them and then iterate and grow.

Patents are not a critical step necessarily in this path!

In fact, a lot of times like I had a conversation with a founder at YC, and they were talking about how they needed to get their stuff patented before they launched as a YC company!

And we just—I didn’t dismiss it outright because there’s always edge cases where it could be critical, but we talk through like what are the benefits that you're like then you expect to come from this patent?

And most of them are for like circumstances that are after you've already hit product market fit!

They’re like projecting problems that they will have in the future!

There are a multitude of problems that you may have!

You need to keep focused on the problems like you actually have, which is you have no users, you have no product, and you have no revenue!

You solve those ones— you will have the pleasure of like running into patent stuff later in the future!

Should we do one more?

Yeah! We can do one more!

Last one!

Where you talk about design!

There’s one of our platform risk—where is that one?

This girl, daddy, was the YouTube platform risk!

Alarm!

There it is!

Okay, Rahmi asks: We have a project that solves a very critical and wide pain point, but it totally depends on YouTube.

So if YouTube decides to block it, well—but we—we will be out of business. Is it a good risk?

It doesn't—this risk we render the business worthless!

Wow!

I think this is something that’s changed—that feels like it’s changed over the last 15 years!

I feel like when I came into the startup world, there were these basically—there were these systems that were open!

And so Google felt like a very open system for finding websites!

That Google didn’t have a whole bunch of other products that were competing with you!

Messaging felt like a very open system; it was SMS, email for like a very open system!

Most emails that were sent were received, even promotional ones!

The tricky thing now is that almost all of these systems are now closed, and almost all of these companies understand that they exploited an open system to get big!

And that if their system is open—if YouTube’s system isn’t open; if Facebook’s system is open—they will be exploited by the next person!

And so the problem is that you’re not only competing with other players in your market, you’re competing against the platform you’re on!

If this is a significant revenue opportunity for the platform you’re on, they have every incentive to either buy you or kill it!

And they’re not gonna buy you for a lot of money because they have a lot of leverage over you!

So the question would ask you is like: Is your dependence on YouTube today or is it dependence on YouTube forever?

If it’s that forever question, I’d be very, very cautious about building this into a business!

I might consider making it a lifestyle business where you can monetize it quickly so that if it does go away, at least you’ve made money and it brings in this like subscription revenue that like YouTubers—must—like hardcore YouTubers must have this!

And therefore they’re willing to pay fifty or hundred bucks a month or something!

Yeah!

The only other way you can get away with this is kind of like the eBay PayPal case, where like your product becomes so mainstream on YouTube so quickly that if you to tried to shut it down, like there’d be a mass revolt!

Yeah!

Which is hard!

But interesting enough, like do you remember Vine?

Like Twitter shut down the Vine replace or not fine—Periscope!

Yep!

And that was popular like that was popular with all the cool kids in San Francisco!

And they still got like me captain!

So yeah!

All right! Cool, everyone! Thank you very much for asking all these excellent questions!

We’ll be back next Wednesday at 11 a.m. Pacific time to answer questions about next week's lectures.

So thanks! See you later!