The Complete Coward’s Guide to Starting a Company: Part 2

Read part 1 here: //www.wallstreetoasis.com/blog/the-complete-coward%E2%80%99s-guide-to-starting-a-company-part-1

Like many of you, I side with those who scoff at the amount of time the developed world wastes in formalized education - i.e., reading and studying rather than doing. In the startup world, this disdain for formalized education is even more pronounced. (Interesting sidebar: statistically, a billion dollar company is no more likely to have been founded by someone with a graduate degree than a high school dropout.)

Despite this, the fact remains that there is some value in thinking before doing, as this approach will save you from making as many mistakes, will reduce your learning curve once you start doing, and will give you the basic level of knowledge that is necessary to operate in your industry. The problem is that what you learned in college was probably geared almost entirely toward working in the traditional corporate setting.

In the startup world, everything is different. The models of thought burned into your brain in college no longer apply, because the assumptions they are based on aren't true in the startup environment. The analogy I've heard is that formalized education (and the MBA in particular) prepare you to be the equivalent of the highly trained engineer who does the complex calculations to adjust a racecar's spoiler to exactly the right height and angle, giving the car the edge it needs to shave a few milliseconds off its time in a high-stakes race.

In a startup, in contrast, you're not fine-tuning a world-class vehicle. You're just trying to get some wheels to stay on a chassis, and the skills required to do that are 100% different. People who try to apply their MBA education to startups often just get in the way. In fact, the startup world's well-known quick and dirty valuation method is to add $250,000 to the value of the company for every engineer, and subtract $500,000 for each MBA.

The point is that there is a knowledge base needed for startups that is completely different from the knowledge base you have, and you're going to need that foundation to operate in the startup world. Fortunately for you, I'm doing all the work for you.


#3: Consider a class

I strongly recommend Stanford Professor Chuck Eesley's free online Technology Entrepreneurship classes. I first discovered these from WSO's very own @Edmundo Braverman (thanks Eddie!), and learned a lot in a very short amount of time. With the class, I honestly went from knowing nothing about how things worked to being very comfortable with my knowledge base. Chuck takes a very practical approach, where you actually start a company and put into practice each week's lesson as the company progresses. There is a heavy focus on software startups, especially for part two of the course, but the material is useful for any type of startup.

You can go to http://venture-lab.org/venture to register for the class, which will run for about three months. Unfortunately, the current session is closed to registration right now, but a new one has historically started every three months, and the last one ended in mid-March. As long as the class hasn't been discontinued, I would expect registration to be open for the next class sometime in the next few weeks.

As with any MOOC, you'll get a wide range of people, from middle schoolers in Kazakhstan to genius engineers and experienced CEOs. The good news is that the site's built-in search functions make it pretty easy to find people with quality skills and experience. My cofounders were a software engineer from the European Space Agency and an electrical engineer from Boeing.

We also continued the company we founded, were accepted into an accelerator, and just raised our seed round a few weeks ago. You might not continue your company, but you will learn a lot if you take the class seriously.


#4: Read Up

For some independent reading, below are three lists that I highly recommend you make your way through before making the leap to full-time startup executive. While not a ranking, each list is roughly in the order of most useful to least useful, so in general, start from the top.

These lists are only to get you started. Most of the books are pretty short, and with an hour of reading a day, you should be able to get through everything listed below in a couple months, possibly less if you're already a reader.

1. Must-Read Books for Basic Startup Knowledge

These are the books that everyone in the startup world read long ago. You'll need to grasp the concepts in the books to understand what's going on; if you don't, it will be tough to get people to take you seriously.

The Art of the Start by Guy Kawasaki
The Lean Startup by Eric Ries
The Four Steps to the Epiphany by Steve Blank
Crossing the Chasm by Geoffrey Moore
The Long Tail by Chris Anderson
The Monk and the Riddle by Randy Komisar
The Art of the Pitch by Stephen Coughter
Mastering the VC Game by Jeffrey Bussgang
The 4 Hour Work Week by Tim Ferriss
One Simple Idea by Stephen Key

2. Must-Read Online Sources for Basic Startup Knowledge

The categories below are for short reading, or when you don't have a book on you.

News

What people are talking about in the startup world.

TechCrunch
Mashable
PandoDaily
AllThingsD

Blogs

These aren't updated quite as frequently, so put them in your RSS feed to avoid wasted time checking for new content.

Feld Thoughts
Both Sides of the Table
Above the Crowd
AVC
Steve Blank
Paul Graham
Venture Hacks
Hacker News
Chris Dixon
Rhys da Vinci

Other Online Resources

More useful information if you want to keep going.

Y Combinator's Startup Library
AngelLists' New Employee Reading List
Startup Digest Reading List
Chuck Eesley's Reading List

3. Must-Read Books for Anyone Who Wants to Succeed at Anything

This list does not fall specifically in the category of basic startup knowledge. However, you will find upon entering the startup world that success requires you to reach a new level in basic skills like time management, organization, and so forth. The effect of your choices, habits, and behaviors are magnified when there isn't an organization to prop you up or hide you. So, I would recommend you also take the time to read the following short list of books to kickstart your personal growth. They might save you from learning some lessons the hard way.

The Power of Habit by Charles Duhigg
The 80/20 Principle by Richard Koch
Getting to Yes by Roger Fisher
How to Win Friends and Influence People by Dale Carnegie
The 7 Habits of Highly Effective People by Stephen Covey

Part 3 to follow…

Comments (32)

 
Apr 4, 2014 - 2:02pm

People who try to apply their MBA education to startups often just get in the way.

Yes, yes, yes. 1000 times yes! Great post once again. Somehow these posts need to go into some sort of WSO Hall of Fame.

"Everybody needs money. That's why they call it money." - Mickey Bergman - Heist (2001)
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Apr 6, 2014 - 8:59pm

Rhys da Vinci:

They are a bit redundant, which is why I didn't list both. AllThingsD is the WSJ, while Re/code is CNBC. I happen to prefer AllThingsD, but neither is better than the other.


Pretty sure he meant that:
1) The AllThingsD brand is inactive now. Everything is now under "WSJ:D" (http://wsjd.com, which redirects to the WSJ Technology section).
2) There's been an outflux of writers from ATD to Re/code.
Currently: future psychiatrist (med school =P) Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)
 
Apr 4, 2014 - 8:18pm

As a non-american, I don't understand the innate link between 'tech' and 'start-ups' - like why is it 'the thing' to create software as opposed to innovation in other areas (hardware/logistics/finance etc). Not to say there isn't innovation in these areas - but why is there such an obsession with software? Scalability and access to capital I guess would be primary drivers, but in terms of innovation, isn't this area a little saturated?

When I think of an entrepreneur - I think of a 'business' maker, literally with no bias towards tech/biotech etc.

But seriously - if there's a clear answer for this I'd love to know.

 
Apr 4, 2014 - 9:33pm

Good question. I think it has to do, in a large part, with startup costs. You referenced hardware and finance. How much does it cost to start a hardware design and manufacturer to compete against the behemoths out there? or a Hedge Fund? A gajillion dollars.

A software, social media, online company? A bright idea and lots of talent. The startup costs are so minimal.

"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right." -Warren Buffett
 
Best Response
Apr 4, 2014 - 10:07pm

1. Scalability
2. Lower startup costs
3. Time frame that matches VC's ideal holding period until exit
4. Inertia & tunnel vision - The industry started out centering around software. People who become VCs come primarily from a software background, and they invest in what they know.

It's extremely frustrating because it's hard to get capital for a great idea that can change the world because the people who control the capital are only trying to find the next Instagram or Snapchat, instead of companies that will truly change the world and benefit society.

 
Apr 7, 2014 - 12:10pm

Rhys da Vinci:

It's extremely frustrating because it's hard to get capital for a great idea that can change the world because the people who control the capital are only trying to find the next Instagram or Snapchat, instead of companies that will truly change the world and benefit society.

So very true unfortunately...

 
Apr 17, 2014 - 6:33am

Rhys da Vinci:

It's extremely frustrating because it's hard to get capital for a great idea that can change the world because the people who control the capital are only trying to find the next Instagram or Snapchat, instead of companies that will truly change the world and benefit society.

Can't agree more heartily.

I am permanently behind on PMs, it's not personal.

 
Apr 4, 2014 - 9:29pm

A very well deserved SB!

"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right." -Warren Buffett
 
Apr 5, 2014 - 4:55pm

Nice post :)
Quick question: what's your opinion of Millionaire Fastlane (MJ DeMarco) if you've read it?

"Hold on a sec...you mean they made all this money without doing IB --> PE --> HBS --> PE --> God? How is this possible?!?!?!!??" - TheKing
 
Apr 6, 2014 - 5:24pm

Thanks. I've never heard of him before, but I looked at his website and had the following general impressions:

1) He makes some important points, like pointing out that you need to find something scalable, and that you will probably never become rich working for someone else. Your best chance at "the fastlane" as he puts it is usually to get out there somehow and start your own business. He also makes a great point that at some point you need to internalize your problems and weaknesses and start owning things instead of blaming externalities.

2) He only succeeded in a big way in one thing in his life. I'm not trying to put him down by saying this (he's obviously a more successful person than me at this point), but while his lessons are legitimate, he can't claim to have found the secret formula that leads to success. He worked hard and was lucky enough to land at the right intersection of market demand, emerging technology, and skillset.

3) He made a series of bad choices in his life that ultimately put him in a bad place. At that point, he had nothing to lose and just started to execute. His story is certainly inspirational, but I'd prefer to be in a good place and then start to execute. Wouldn't you? There are thousands like him who were where he was, did what he did, and are now working as pizza delivery boys or cashiers. There is major selection bias here; the people who fail don't put up websites and publish books, which is one of the major points of my posts.

 
Jun 8, 2014 - 2:31pm

This is a late reply but I took a lot of time to think about #3...
When you say "be in a good place and then start to execute", would you consider undergraduate a good place compared to, say, a job? I'm debating whether to start working on mine in college (I'm there for relatively little cost that mom&pop have been generous enough to pay themselves, only distraction to me is getting my econ major and networking) vs. after (no more school but I'd have to start working and paying for myself)

"Hold on a sec...you mean they made all this money without doing IB --> PE --> HBS --> PE --> God? How is this possible?!?!?!!??" - TheKing
 
Apr 8, 2014 - 4:33am

I do like your suggested reading list / blog posts. Immensely important. If I might add, Howard Lindzon's blog is also a must follow if/since you are interested in finance. www.howardlindzon.com and @howardlindzon on Twitter

@Nivo0o0
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Apr 8, 2014 - 5:29am

Very good thread by the way.

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.

See my Blog & AMA

 
Apr 8, 2014 - 4:29pm

the relevant people from AllThingsD are certainly all gone -- Walt and Kara left with their team and started Recode a while ago, and whatever is left of WSJ's tech coverage isn't really worth reading at this point. so I'd absolutely add Recode, GigaOm, and maybe VentureBeat and The Verge to your list of news sites. religious Twitter use (at least reading) is also perhaps the easiest and maybe the most important thing you can do to really stay informed in real time and be involved. follow every founder, executive, VC, advisor, prominent designer/engineer/product person, etc. you can think of or find. can't overstate this, Twitter is incredible as a source of news.

also, for blogs: in addition to everything listed, Ben Horowitz's blog and new book (The Hard Thing about Hard Things) are absolute must-reads. strongly recommend Andrew Chen's blog as well. Medium is another great resource for high quality content. Naval Ravikant (AngelList founder) also blogs at startupboy.com and is brilliant. there are also a lot of really excellent more sector-specific blogs as well, e.g., for enterprise tech or bitcoin.

for books, Clayon Christensen's The Innovator's Dilemma, Andy Grove's High Output Management and Only the Paranoid Survive, and Brad Feld's Venture Deals are four additional must-reads.

the PandoMonthly series is really amazing too. Pando founder/CEO Sarah Lacy basically does a 1.5 to 3 hour interview with a super prominent tech figure each month that's recorded and posted for free on Pando's site and on YouTube, including people like Peter Thiel, Elon Musk, Marc Andreessen, Ben Horowitz, Brian Chesky, Drew Houston, Dick Costolo, Reid Hoffman, Fred Wilson, etc. if you're at all interested in this stuff and have the time, the interviews are seriously great.

 
Apr 8, 2014 - 6:30pm

noiven:

the relevant people from AllThingsD are certainly all gone -- Walt and Kara left with their team and started Recode a while ago, and whatever is left of WSJ's tech coverage isn't really worth reading at this point. so I'd absolutely add Recode, GigaOm, and maybe VentureBeat and The Verge to your list of news sites.


VentureBeat is definitely top reading for anyone interested in the startup world. They actually have superb coverage there, worked with a few journalists myself.

Mashable might be another one to keep on your radar. Polygon if you like the media/entertainment/gaming side (same people who run Verge).

And how come no one has mentioned Quartz yet?!

Currently: future psychiatrist (med school =P) Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)
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