My talk from YC startup school

Hi I’m Ian Hogarth and I’m one of the co-founders of Songkick along with Michelle You and Pete Smith.

We started Songkick back in 2007 and were part of the summer ‘07 YC batch.

Songkick is the easiest way to find out when your favourite artists come to town and get tickets. If you’ve ever experienced the frustration of finding out that your favourite band was playing the day after the show then we’re for you. We’re the second most used concert service in the world after TicketMaster with about 10m unique fans/mo. We’re backed by Index and Sequoia. Given that the average artist makes 70% of their income from concerts we hope we will make a big difference to artists as well as fans.

One thing that comes from building the same company for 7 years is you get to watch waves of start-ups succeed and fail around you and your intuition about start-ups gets rewired. It’s kind of like rewatching the first series of 24 after seeing the final episode of season 8.

I remember being terrified by a competitor to Songkick that launched while we were only just getting started. They rapidly grew to millions of users. However over the next few years the foundation they’d built their growth on moved underneath them and they disappeared. That resets your sense of what to be scared by.

Similarly you will see startups that seem to have it all figured out, and when they become the talk of the town, it doesn’t surprise you. What may surprise you is what exponential growth looks like. That start-up that was doing well and just a bit better than you goes from 1m users to 10m in a year. And you’re still like ok we have a big year coming. But then you see them go from 10m to 100m the next year. And that resets your sense of how things can grow.

To put this in perspective, if I go back to that summer of 2007 only a few of the 22 start-ups in our YC batch are still in existence. I believe most of the others ended up being shut down or acquired in relatively small deals. Watching that play out really teaches you how hard it is. I remember being intimidated by everyone in our batch when we got to YC. So many people who were better technically, better product thinkers, and more experienced at building web products than Pete, Michelle and me.

One of the other start-ups in our batch that is still around is Disqus. If I massively oversimplify for a second, it’s plausible that Songkick and Disqus may end up being worth 100X more than start-ups in our batch that were sold early, so there may be something to be learned from what was different about our markets and our path.

But the more radical example is that other start-up that endured from our batch, Dropbox. Which is likely worth 100X more than us at this point.

What’s even more remarkable is that Drew and Arash remain two of the most humble and down to earth founders I know.

There is plausibly someone in this room who will go on to create something 10X bigger than Dropbox.

So hopefully you’ll take this as a bit of a disclaimer for all the advice that follows - if you really want to know the mysteries of the startup universe go talk to Drew and Arash! Also I am most interested in consumer products, so most of this talk applies to them.

So having appropriately caveated that I have at least 100X less insight to share about what goes into building the next Google than most other speakers who have spoken at startup school, I thought about what I would most like to have had someone explain to me in retrospect.

Firstly, on online music as an excellent way to take a beat down. Here are some exceptionally talented founders/builders who have, to a greater and lesser extent taken a beat down by doing a music start-up:

Dalton Caldwell now a YC partner and the former CEO of Imeem; Sean Parker; Geoff Ralston the creator of what became Yahoo Mail & former head of product of Yahoo; Ali Partovi founder of LinkExchange & iLike, Dave Goldberg CEO of SurveyMonkey and Launch Media, David Pakman Venrock partner & former CEO of eMusic - all drawn to the flame! I thought I could put a useful talk together summarising what I’ve learned from talking with some of these great people who have built music start-ups. I then realised that Dalton already did that talk.

Dalton’s YC talk is an excellent primer on the music industry so I’m not going to rehash his advice here. What I will offer you is a slightly more reductive view on the art and entertainment industry - film, TV, music, visual art - if you’re thinking about building a company in one of those domains here is what I think you need to understand:

1. everyone thinks they are more into music/film/art than their actual consumption reflects. it’s like that study you may have read about around the sub-prime crisis where most homeowners felt that average house prices would decline during the next 6 months, but also that their home would stay the same or increase in value

2. actually most people are into a much narrower set of things than they realise. And so a small number of creators drive the majority of activity and revenue for these industries

3. 99.99999% of artists struggle their whole lives without financial success, so when they break out they are often willing to trade future rights to their music or touring or merchandise in exchange for financial stability. Having artist friends who are still sleeping on friends’ couches after 10 years this isn’t selling out, it’s about getting stable and finally paying off your debts. Unlike tech where you can be a talented engineer at a start-up that fails & still go get a great job at Google, if you’re a great musician that fails to make it you can’t just go join Radiohead

4. this transference of rights from artists->middlemen leads to a small number of companies controlling a huge amount of the rights that are needed to innovate on behalf of the artist or consumer. In addition as the entertainment industry lurches from one model to another (for example CDs to downloads to streaming) the perceived threat to their survival means regulators allow even more radical consolidation - for example in the last 10 years the world’s largest record label Universal acquired EMI, who combined now represent something like 40% of popular music rights. The same thing happened in the live industry with the merger of the biggest global concert promoter, LiveNation with the biggest ticketing company, TicketMaster. And don’t be fooled into thinking that other parts of the music industry aren’t rights oriented markets, both merchandise and ticketing both have similar rights systems in place comparable to copyright in recorded music

5. that level of rights consolidation means that it’s almost impossible for a start-up to transform the entertainment industry without some permission from one or more powerful content owners, which means waiting till they are ready to embrace you. That in my opinion is one of the differences between Spotify’s success now and the nightmare that Dalton went through. The one caveat is that much much larger technology companies can force things to move faster - for example the way that Google protected YouTube from potential label annihilation and 8 years later owns the largest free streaming music service on the planet - or the way that Apple created a digital download market in one big move

6. So I think the biggest question to ask yourself as someone aiming to build a technology company serving fans and artists in the entertainment industry is why will the labels/promoters/agencies/studios/galleries be ready for this now? If pg said Kill Hollywood, I guess I’d say Grow Hollywood or fail

The broader point here is that the level of supply-side consolidation in your industry massively changes how you build your start-up. If the industry is heavily consolidated you are more likely to have to partner with the supply-side middlemen. Consider for example the work that Stripe did with the banks early on. If the supply side of the industry is more fragmented (e.g. vacation rentals or private hire vehicles) you are probably best off competing directly with the existing incumbents. 

The flip side of this is that it’s incredibly rewarding to work on a product that helps fans & creators in an area of culture you love. I’m proud of what we’ve done so far to improve concert-going and I’m inspired by what Netflix, Spotify and others have done for their respective industries. You just need to make sure that your timing is right for the middlemen, as well as fans/artists.

The second thing I want to share today is the importance of understanding the start-up game before you try and play it.

 

Start-ups aren’t a straightforward path to financial success. Particularly in consumer start-ups the level of randomness means that as someone who is good at building things you’re more likely to make money from joining a great company as it starts to take off (the first first 100 employees @ FB probably made more money than the founders of most successful start-ups).

So I think the reason to found a company is actually a less financially oriented one - you are really motivated to try and solve a particular problem and the satisfaction of building something to solve that problem is enough to balance out 5-10 years of high stress and a good likelihood of failure.

So if I haven’t deterred you yet, then here are the rules of the game as I see them. Hopefully internalising these challenges early on will help you be more successful. There are 3 engines that determine a start-up’s success:

 

A gratification engine, a growth engine and an economic engine. This insight came to us via the legend Sean Ellis about 3 years into Songkick’s life.

 

If I define a new variable ‘Unicornness™’, your level of unicorness will be roughly:

Unicorness = gratification^growth^revenue

You become full unicorn aka Airbnb, Dropbox, Google if you get all 3 right. Every engine that fails to start will reduce your unicornness an order of magnitude.

Let’s take the gratification engine, expressed in much less nerdy terms by YC as “make something people want”. In Songkick’s case figuring this out was a pretty brutal experience. We launched Songkick to solve the problem of knowing when your favourite artists were coming to town. Our first release combined a few different scrapers of ticket sites that generated an incomplete dataset of concerts in the US and UK and a mac plugin for iTunes that you had to download and install that would scan your itunes library. It was a pretty crappy first time use.

The return on the 5 minutes of your life that it took to sign up and install the plug-in was a list of upcoming concerts, personalised to your music taste. Some people were willing to do this and they liked it. But the amount of friction involved was too high for most regular fans. And Songkick ends up being most powerful for regular fans who at present go to ~1 show / year, but after getting Songkick might end up going to 4 or 5.

For a long time we felt that the reason that more people didn’t use our product was that it didn’t do enough and we added a massive array of additional features that resulted in very little additional usage.

The turning point came when my co-founder Michelle, inspired by Sean Ellis, started running surveys that really dug deep into why the users who loved our product loved it. And why the users who were kind of ‘meh’ found it lacking. The bottom line was that our simple idea of personalised listings and not missing another great gig was actually a gratifying enough experience for all types of music fans - people found shows they wouldn’t have gone to and had life changing experiences! but too few users were getting to it. We needed to make it radically easier for you to give us your music taste (which became possible with new APIs on mobile devices) and we needed to have better underlying data. That was a really big lesson for me. Engineers and start-up people cherish the idea of 80:20, or the idea of an MVP. But once you find something that works, the key is to do the 20:80, the grindingly incremental work that adds the final 20% of the value, but takes 80% of the time.

For us this has ended up being around data - getting more and more high quality, timely, more comprehensive concert data so we became the trusted authority for a fan. Your gratification engine will have many levels of refinement that compound on each other - onboarding flows, core experience, messaging etc and you should probably never stop trying to increase it.

The next engine is the growth engine - how new users discover your product. The first big point here is that your growth engine has no real chance of starting without a great product. I’ll talk more about that in a minute, but I think there are 4 main ways to drive substantial growth in consumer products:

These aren’t mutually exclusive. For example Yelp has a killer mobile app so they grow through both world of mouth and SEO. Airbnb also has strong WOM which means they can amplify a referral program with paid acquisition. They’ve also grown through M&A, PR & more creative growth hacking e.g. the alleged craigslist thing. So many different growth channels can combine effectively.

For us there were a number of different drivers of growth. The first was realising that there was no canonical page on the internet for a tour or concert - similar to what Yelp does for restaurants or IMDB for films. And when you build enough value to be the canonical page for something you see lots of different sources of growth, from social referrals to API/platform opportunities to SEO. That core insight lead to a flurry of things that caused us to grow from the BD partnerships we did with YouTube, Spotify, SoundCloud and others to our artist facing products. The second big growth factor came from mobile and WOM - in my opinion, mobile app stores reward a gratifying product more than any distribution platform in history and so much of the growth we saw there came just from making the product easier to use so more people would recommend it to friends. So we’ve benefited from 3 of these channels.

Finally the economic engine, how you make money from your users. I can’t say as much about this because it’s still a work in progress and one reason that we’re not (yet!) in the pantheon of unicorns. Initially we bootstrapped revenue by setting up affiliate partnerships with ticket vendors who pay us when we generate a ticket sale - similar to the model for Kayak or TripAdvisor. That has taken us to millions of dollars in revenue on gross ticket sales of over $100m. However it is unlikely to take us hundreds of millions in revenue. Our goal is to enable fans to buy tickets in the Songkick app as well as getting linked out to 3rd party sites. Per my earlier discussion on music start-ups this depends on being able to scalably access inventory in partnership with artists, promoters & venues, which is still a work in progress. It’s exciting though - in London you can now buy tickets to a huge number of gigs through our app (over 25% of all shows in London & growing fast), and we’re rolling out other geographies soon.

Finally there is the team you build and retain to solve all these problems. This is the Songkick team en route to a festival when our bus broke down!

Each of these are dependent on each other. If I had to express it mathematically it would be something like:

Firstly, gratification is a function of your team, your economic engine and your growth engine.

That’s because you need a great team to build a great product. And a powerful economic engine can be a big part of your gratified experience (e.g. saving users money). Finally in many instances a consumer product gets better with more users (e.g. a marketplace or social network), so you may also need growth to deliver a gratifying user experience.

So the gratification engine depends on the other two engines and your team.

Secondly growth is a function of your gratification engine, your economic engine and your team.

That’s because great execution on growth requires hiring great growth people, so growth is dependent on team. If you have a revenue engine you are also able to pay to acquire users and access a powerful source of growth. One key point to make here is that it requires more expertise to grow through free channels than by spending money on paid channels - compare the number of start-ups that figure out how to grow virally on Facebook with the number of start-ups who figure out how to buy FB ads. Most importantly without a great gratification engine you won’t get the most powerful and fundamental growth driver, word of mouth. As yet another example of this interdependence - our partnership with YouTube didn’t start via VC connections, or epic biz dev. It started from a product manager at YouTube reaching out because he loved our product as a regular user.

So the growth engine depends on the other two engines and your team.

You can make similar arguments for the interdependence of the team you can hire and retain and your economic engine on everything else.

So:

unicornness = product*revenue*growth

growth = f(product, revenue, team)

team = f(product, revenue, growth)

product = f(team, revenue, growth)

revenue = f(growth, product, team)

AKA everything is connected and you’re watching the first season of True Detective.

I’ve laboured this point because it seems like the most important thing to understand about start-ups is that it’s all connected and you need to get all of these key pieces working in concert to build an exceptional business. The earlier you figure out the whole system, the earlier you get on the path to becoming the next Dropbox.

Finally, all of this takes time and is very hard and you can’t give up. So some thoughts on resilience and how to develop it.

Firstly - it does usually get better if you keep going. I remember the bleakest point in Songkick’s life was around december 2010. Nothing felt like it was working. We went into Christmas after a pretty brutal board meeting with a plan for some things we’d try in the new year.

When things get hard I go back to our growth graph since then and look at that same spot.

It usually does get better if you keep moving and trying new things. As pg says be “relentlessly resourceful”. As the founder of a great company told me once - survival can be a growth strategy. The best thing about surviving is that you get to see new platform shifts for example the shift to mobile that Songkick has grown through. Everyone likes to talk about how new start-ups get built when new platforms emerge. But things that are already working can suddenly work a lot better. For example Shazam and Pandora are two companies that were 8 and 7 years old at the time of the iPhone launch and had been great, but not total breakouts. The iPhone played a big role in changing that. I remember hearing from the Pandora team that the iPhone launch doubled growth for them overnight.

Platform shifts expand the set of start-up visions that can finally be fully realised. So let that be another reason to push through the hard times.

I would recommend trying to articulate why you believe you are doing important work. I think a good way to do that is to keep asking why until you get to the root. We wrote those down a few years back and here’s what we came up with:

Then when you are low you have something to remind you why you’re going to work through whatever todays flavour of crisis is. 

When you’re having a bad week, spend some time with your users. The happy ones will remind you of why you started. And the unhappy, disengaged ones should help you transform an abstract sense of impending doom into a practical feeling of something to fix. Our product team ended up knocking through a wall in one of our meeting rooms and creating a makeshift user research lab. That helps to set a regular tempo for having our whole team watch our users use your product as individuals, not in an aggregate Google Analyticsy way.

Start your company with people you can count on when shit is going sideways. I think it’s pretty hard to know that about someone without a real foundation of friendship so I thoroughly endorse YC’s thing about building on top of a long standing and trusted relationship. I have been very fortunate to have two amazing co-founders in Michelle and Pete and an amazing team, many of whom have been with us from very early on. I can’t imagine how I would have weathered some of the tougher moments without them.

So in summary:

- if you’re going to do a start-up in the entertainment industry or any industry where the supply side is highly consolidated, you’ll probably need to work with the existing middlemen. So start trying to understand how you can help them in addition to fans & creators.

- consumer start-up success seems to depend on getting 3 key fundamentals right: gratification; growth; economics. Understand how you’re going to do that as early as possible.

- even once you find something that people want, there will still be days when it feels hopeless. I’ve suggested a few ways to nurture your resilience when that happens. If you keep moving, you’ll find a way through!

Thanks.

What should Benedict Evans' business model be?

I started sketching out this post before Benedict joined a16z, so excuse the fact that his ‘business model’ is now resolved for a little while :). For 'Benedict Evans’ feel free to substitute any smart, public intellectual unaffiliated to an existing organisation with a wealth of insight to provide.

When Benedict and his blog emerged on the start-up scene, it was an interesting event: he had over a decade of experience in mobile & media and was rapidly building an audience of the most influential people in tech. The most entertaining feature to me was his weekly summary of how many more readers he’d acquired that week. I reached out to him when his blog was just getting started and we had a good conversation over breakfast. I really admire him and watched him build his audience with fascination. The question that kept coming back to me was - what should his business model be?

The value proposition as I see it is: world class insight into a particular domain (in his case, mostly the evolution of mobile/media) which he was providing for free. Normally such insights are clearly part of a broader free+paid model - Fred Wilson was eloquent and explicit about this when describing his blog: “It is the model behind this blog in fact. You get the content for free. Anything else, you have to pay for with equity in your company”. 

The ways to get paid that I could see at the time:
- put some of the content behind a paywall (e.g. similar to Ben Bajarin at Techpinions or Om Malik) ie charge a subset of the public for incremental insight
- get paid offline (e.g. Eric Ries’ book, events etc)
- build a product around his community (e.g. Sean Ellis & growthhackers that monetises in another way)
- get paid in cash/equity as an advisor to various start-ups, VCs, established businesses ie charge individual businesses for company specific insight
- get paid in carry as part of a VC firm

I have to say I was hoping that somehow this might represent the unbundling of VC and that Benedict would build a standalone business around advice/insight. But I suspect that what he’s doing now will probably be the best move he could possibly have made. It is interesting to consider what % of a16z he has vs the other partners/contributors. It would be a great data point on the value of insight.

Building start-ups from first principles

image credit

In my opinion one of the most helpful things YC has done for the start-up ecosystem is to apply a reductive mindset to start-up strategy: Make something people want. There is so much wisdom contained in that one sentence.

The thing it reminds me of most is studying mechanics at university. The way I was taught mechanics, your goal is to take a small set of first principles (mainly Newton’s laws of motion) and learn how to rigorously apply them to understand the motion of physical objects. The point in a classical mechanics course where you apply these simple laws and end up with a model of how a gyroscope works is breathtaking.

I watched Elon Musk speak at the Dublin Web Summit, and one of the most helpful points he made was that innovation is the product of reasoning from first principles (good summary here). Given his current set of companies he was mainly referring to the first principles of physics/chemistry, but I think there are some similar first principles for building start-ups that must be discovered and applied. YC’s motto feels like one of them. Like Newton’s laws of motion, the hard part isn’t reading the sentence once, the hard part is learning how to apply it to understand a gyroscope. Paul Graham’s essays on start-ups and their early customers often feel like the course notes that explain how to apply that first principle.

One of the hard things about being a start-up CEO is simultaneously building a product and a business from first principles whilst recognising the need to market your business through narrative and analogy. The classic example here is the “X of Y” pitch that drives most investor pitches. Narrative and storytelling is an incredibly important component of marketing and quickly explaining what you do. But if you want to build a great product & business, and you try to do that by analogy, you will fail. So the art is to learn how to use first principles when you are building, and analogy when you are selling.

Start-up inspiration at every age

Age 19 Matt Mullengweg co-founded WordPress
Age 20 John Collison co-founded Stripe
Age 21 Sophia Amoruso co-founded Nasty Gal
Age 22 Joe Lonsdale co-founded Palantir
Age 23 Daniel Ek co-founded Spotify
Age 24 Michelle Zatlyn co-founded Cloudflare
Age 25 Larry Page co-founded Google
Age 26 Julia Hartz co-founded Eventbrite
Age 27 Ben Silberman co-founded Pinterest
Age 28 Andrew Mason co-founded Groupon
Age 29 Bryan Johnston co-founded Braintree
Age 30 Jeff Bezos founded Amazon
Age 31 Perry Chen co-founded Kickstarter
Age 32 Victoria Ransom co-founded Wildfire
Age 33 Jan Koum co-founded WhatsApp
Age 34 Jessica Livingston co-founded Y Combinator
Age 35 Reid Hoffman co-founded LinkedIn
Age 36 Renaud Laplanche co-founded Lending Club
Age 37 Reid Hastings co-founded Netflix
Age 38 Jimmy Wales co-founded Wikia
Age 39 Martin Lorentzon co-founded Spotify
Age 40 Aneel Bhusri co-founded Workday
Age 41 Paul English co-founded Kayak
Age 42 Robin Chase co-founded Zipcar

…running out of time to Google people’s ages but here’s a start on 43+:

Age 46 Linda Avery co-founded 23andMe
Age 50 Andrew Viterbi co-founded Qualcomm
Age 52 Kenneth Lerer co-founded The Huffington Post
Age 55 Arianna Huffington co-founded The Huffington Post
Age 58 Satoshi Nakamoto (maybe) co-founded Bitcoin
Age 64 David Duffield co-founded Workday

Your age and experience (or lack of) will help you and hinder you in different ways. Ambition & opportunity, at the right time in your life, with a big problem you want to solve, is probably more important.

ps if you can help me fill out names for the blanks post age 43 then please leave in the comments and I’ll add.

pps some interesting empirical data here and here.

The best 'growth hackers' don't talk about 'growth hacking'

Over the course of building Songkick, and seeing it grow to over 9 million fans/month, I’ve had the pleasure to learn from and work with some exceptional thinkers on growth. I’ve learned the most from Dan Rogers who has lead our quantitative growth efforts since 2010, Sean Ellis and Andrew Hunter who was an early advisor to Songkick and Dan’s mentor. I love learning about marketing and have at various points in Songkick’s past tried to make sense of various types of distribution, primarily:

- quantitative growth channels e.g. viral loops, email marketing, widgets, SEO, SEM

- partnership or narrative driven growth channels e.g. BD partnerships, PR

Quantitative growth channels are now what’s termed ‘growth hacking’.

It’s a mix of creativity (finding novel channels to drive growth that competitors have not yet discovered) and technical/analytical skill (scalably exploiting those channels). The lifecycle is:

1. find a channel that works before your competitors (and if the channel is broad enough this may include all consumer apps)

2. exploit that first mover advantage

3. eventually competitors cotton on and you hit the Law of Shitty Clickthroughs, or the channel closes for some other reason (e.g. platform you’re building on decides to compete)

4. get creative & go find another novel channel. Return to step 1.

Another way of looking at this is that new marketing channels have a limited amount of new users they can supply, and there is infinite demand from start-ups who want more users. It’s a zero sum game, where the overall value of winning the game also usually declines over time.

So the best growth hackers shut the fuck up about what’s working & hope that they can keep the channel to themselves for as long as possible. Usually the only way you learn really novel marketing approaches is by spending time in person with a trusted peer, sharing your respective secrets & hoping the novel things you learn from them balance out the information leakage.

This is at odds with what’s going on in start-up land at the moment where there’s now even a forum dedicated to 'growth hacking’. I’m really skeptical you can learn anything there beyond what’s worked in the past (which is no longer relevant) and how to apply a quantitative approach to marketing. I have a theory that the growth hackers forum is actually just an elaborate growth hack by Sean Ellis to market Qualaroo!

So if you’re a start-up looking to grow, get creative, find your unique approach to growth and then keep it to yourself.

Could VC 'value add' be quantified?

Every VC talks about ‘value add’. The unique ways in which they believe they can help you build your business, be a great partner, and increase the chance of your start-up being a success. These include their network, recruitment, strategic advice, operational experience etc. 

I have observed that a great angel/VC partner/firm can add enormous value. As a simple example of something concrete that changed Songkick’s trajectory, Saul Klein our board member from Index knew we were urgently looking for a world class designer, and introduced us to Gideon Bullock who he knew from his days at Skype. Gideon became our Creative Director and is a core member of Songkick’s management team. That’s just one example and I have hundreds more examples of things that our investors including Greg McAdoo from Sequoia, Peter Read, Paul Graham and many others have helped us with in building Songkick/Detour. 

But there are other investors that I have encountered or learned of who do not add meaningful value beyond their capital, and in some cases, actively destroy value by distracting, confusing and generally offering poor advice to start-ups. I’ve lost track of the number of off the record conversations I’ve had with founders where they tell me about a VC pushing them to do something they know to be fundamentally wrong for their business, and the distraction it is causing. 

Clearly there are qualitative signals of who adds value - you could look for example at which VC firms great angel investors steer their companies towards. You can look at how effectively VCs win deals etc. Just as there are qualitative signals around product market fit, the most important concept for start-ups. With product market fit, the most valuable contribution I believe anyone has made to the discussion is Sean Ellis’ concept of ’% very disappointed’ as a way of quantifying how close you are to to achieving PM fit and moving it away from a purely qualitative discussion.

I’d like to suggest a comparable metric for VCs to track, as they question how much value they add beyond their $$. They should ask their portfolio companies “If I had provided zero capital, how much equity would you give me in your business for the advice and support I provide”. Let’s say the founder came back with an answer of 5%, but you own 20% of the company, you know that 15% of your value is in the capital you provide and 5% in your 'value add’. YC have taken this to the extreme by offering so little capital that the 6% average equity stake they take is close to entirely value add.

This statistic will be somewhat inflated as founder worry about wounding their investor’s egos, but it should nevertheless provide a good sense of how your value add compares to your equity stake. More interesting, an independent 3rd party with the trust of enough founders, could establish a clearer index of investor value add across a wide set of start-ups, and help to rank value add across the investment community.

Over the long term as an increasing set of funding mechanisms emerge (Kickstarter, Angellist, Upstart etc), this may be an increasingly important question to ask as VC itself is disrupted and partially/completely decoupled from the capital it provides.

Talking to People You Don't Know

I did kind of a long talk tonight at the London Hacker News Meetup. People seemed to find it helpful so I thought I’d put it up online as well. If you weren’t there you can just skip the italicised bits if you like. I’m not embedding the slides because it stands alone more easily as an essay.

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I’m really honoured to be here today to speak to you guys. It’s actually kind of a special moment for me because 5 years ago there was a suggestion on News.YC from tpatke asking “if anyone has the leadership ability to organise a meetup - I would be very interested”. My co-founders and I got pretty excited about the idea of meeting other start-up minded people in London and made an event happen. We did a few more, enough to really seed the idea. But didn’t have the time to see it fulfil its potential so I’m so happy to see what Dmitri and many others have transformed a gathering of 50 people in our first office into! I heard that this event has had almost 1000 people show up in the past, that’s a long way from the 30 or so folks who came to the first one. It’s so cool to see how far London’s start-up scene has come since then.

So I was trying to figure out a good thing to talk about to you all today. Thinking back to everyone who stood in that room back in 2007 and wondering how much the audience has changed. My guess is that most people here are a bit like we were back then. Anxious to do something great and looking to learn how to do that from likeminded people. I thought back to some stuff I wish I knew back then and thought I’d talk about the non-technical side of start-up building, aka selling, aka talking to people you don’t know.

First just as a bit of background I guess I should tell a bit about myself. I grew up in South London and have always been happiest when I’ve been making things. I’ve done that in various guises - I made fighting robots in Japan once, studied Machine Learning at university and worked on a computer vision system to classify breast cancer biopsy scans and various other projects. For the past 5 years I’ve been building Songkick with my co-founders Pete and Michelle, and an amazing group of people, based in East London. We were part of the summer ‘07 YC batch along with Disqus and Dropbox, and the second team from the UK to do YC.

Our dream at Songkick is to make the world of live music as great as it can be. We believe that an amazing concert can change your life. That it’s the most intimate connection between and artist and a fan. We believe that live music should be for everyone. But the industry surrounding live music, whether ticketing or other has drifted to a place where it is failing fans and artists. And as a result the experience of seeing music live has drifted to a place where it is niche. We believe we can fix that by using technology to rebuild the connection between artists and fans.

We’re now the second largest concert service in the world, after Ticketmaster, with over 7 million people using Songkick on the web, iOS and Android every month. We’re partnered globally with brands like Foursquare, YouTube, Spotify, SoundCloud and many more. We’ve been fortunate to partner with some great company builders in YC, Index and most recently, Sequoia.

Many of you will hopefully be users of Songkick, but you may not be aware of a new product we’ve been working on called Detour. It’s kind of the natural extension of Songkick, and I’m incredibly excited about it, because it has the potential to dramatically improve the live music experience for artists and fans. Essentially it’s predicated on the belief that when a true fan really wants to see a band live, they’ll do more than just leave a comment on that artists facebook page. They’ll step up and pledge to buy a ticket. And if enough fans self-organise to pledge to bring a band to say London, that de-risks the system for everyone involved and makes more and better concerts happen. We’ve done Detours now, on top of Songkick for artists like Hot Chip, Andrew Bird and Tycho, and it feels like we could be onto something really special. Most importantly the Detour experience it feels authentic to the experience of seeing your favourite artist live.

So over the time we’ve been building Songkick, as co-founders do, I’ve played a variety of roles. I wrote part of the first version of Songkick, and as soon as we found people who were far better at creating web apps, I stepped back from that and put my copy of Agile Web Development with Rails back on the shelf and tried to figure the next most valuable thing I could do. I ended up spending some time on product, then we realised that my co-founder Michelle was vastly better at that than me, so I looked around for the next place to help out. I ended up spending a lot of energy on the hacker side of marketing, which as I’m sure everyone in this room knows has been rebranded as ‘growth hacking’ in the last few years, but for a while I was all up in them traffic acquisition forums figuring out how to get fans to discover Songkick with our zero dollars marketing budget. We found an amazing guy, much more talented that me to take that on after a while and I then spent a while working on distribution partnerships and business development. And at various points in our life I’ve spent a ton of time on hiring, and some on investors and press. I didn’t really know how any of that stuff worked when we started out, and today I want to try to share some of the key things I’ve learned so that if any of you end up stepping into those roles, you have a few helpful abstractions to keep you on course.

Firstly I want to start with something that another YC founder said in a recent article that just felt so succinct:

“If you don’t like shoveling, then don’t work at a startup.  
If you like “managing stuff,” then don’t work at a startup.
You build or you sell.  There’s nothing else to do.” - Christopher Steiner

I think that’s such a great distillation of start-up roles. You build or you sell. I’d modify that to allow that selling is a form of building. Hiring is all about selling, getting people engaged and excited enough to see how your little start-up could make something they love, genuinely better. So selling is the route to building your team. So is it selling, or is it building? Bus Dev for consumer start-ups is about doing partnerships that define a distributed version of your service. So it’s that building, or is it selling? You go out there and you persuade a great VC to fund you and join your board. If that person becomes a core part of your team, someone who you call up when things get hard, who helps you navigate the real challenges of building a company is that building or selling. And to invert things one more time, when an engineer gets excited about a new product idea and they excitedly run around telling everyone in the company about that idea, is that building or selling.

I think my conclusion has been is that building a company is about making and selling. And you will not succeed by neglecting either. Today I want to talk about a specific version of selling:

Talking to people you don’t know.

Before we go much further I want to just be clear about what I mean by selling. I don’t mean that glengarry glenn ross dude with the leads, or that pushy guy trying to force you to buy something. Fuck that shit. I think that selling is about authentically sharing with someone what you believe in, carefully listening to to what they believe in, and finding the places where those are in alignment.

So selling can take on various guises, from sitting down with a key reporter who covers your industry and explaining why your company is relevant to their column. It can be persuading someone you’ll get 15 minutes with why they should invest in your company. Here are some of the areas it touches:

1. Hiring
2. BD/Sales
3. Fundraising
4. Press

And I think those are roughly in priority order. Let’s take an example of a couple of well known YC start-ups. I think if you talk to the founders of Dropbox or Airbnb, they’d probably agree that the most important ‘sales’ they have done have been to convince people who became incredible core team members to join the company. People like Joe Zadeh who joined Airbnb really early on and manages big parts of their product. Who architected one of the cleverest and most scalable schemes for recruiting hosts you could ever imagine (look up his sxsw talk on their system for managing professional photographers. It’ll blow your mind). In the case of Dropbox they focused on consumers for the early years, so there has been relatively little BD/Sales, but for Airbnb, the time they spent in person with home-owners, understanding the value they provided them was probably the next most valuable use of founder time out of the building talking to people they didn’t know. Then based on our experience working with Sequoia with whom we share investors, I’m sure that they have come to see their respective partners there as an extension of their core team, and value that ‘sale’ as one of the best things they did. Finally press is a funny one because of its multifarious impact on a start-up’s prospects. It kind of greases all the wheels, it’ll help with hiring, with partnerships, with fundraising and for some companies it can be a scalable means of customer acquisition.

So with that hierarchy laid out I thought I’d dive in and try and share some really specific advice on the top 2 variations of selling to people you don’t know: hiring and BD/sales. In general, this stuff about selling is kind of generalisable. Once you learn how to do it well and scalably in one area, you can transfer a lot of that over to the rest.

Hiring.

There are kind of 2 stages to hiring in my mind.
1. Making the best people in the world aware of your job opportunity
2. Persuading them to join you

The second bullet is kind of the beating heart of all the sales you’ll do as a founder or start-up team member. Explaining why what you are doing really matters and why they would have the time of their life doing it with you. You can’t fake that bit, it’s basically about uncovering the most open hearted and authentic motivations that drive you to do what you’re doing, and finding words to quickly and easily explain that to people who haven’t yet realised how important the work you’re doing is. For people who aren’t natural verbal communicators a good hack is to do a 5 why’s analysis of why you’re spending your time on this company. That’ll force you to try to articulate your intrinsic motivations. And hopefully those motivations are large hearted enough to get others inspired to join you.

1. Making the best people in the world aware of your job opportunity

The first part is really interesting and by far and away the hardest part of hiring. It’s what everyone underestimates and it’s a big part of the reason the recruitment industry is so utterly broken. Figuring out how to crack it is probably the most important thing you can do if you’re a seller at your start-up.

Now this is all with the caveat that you’re an exceptional team looking to hire exceptional people. Many start-ups don’t set the bar that high, and in which case hiring is pretty easy. You just hire the best person the recruiter sends you. We have an extremely high bar at Songkick. I think from what I’ve heard from our investors one of the highest in the European start-up scene. And for most of the start-ups I truly admire, companies like Dropbox, Airbnb, Kickstarter, Stripe and others, having a high bar is a defining characteristic. I would argue that with the pace of change in technology it’s the only way to build an enduring company in our industry.

Having a high bar should be an incredible asset as a founding team/start-up, but only if you can reach enough people with your message to keep pace with your growth. If you don’t reach enough people it can flip to being a potential cause of failure. I remember having board meetings in the early days of Songkick where we would have arguments about how quickly we were hiring. Looking back we were both right - we were right to set our bar where we do, and they were right to say we should have been hiring faster. The missing piece what that first and hardest step - making more people aware of your opportunity.

So how many more people? I think a good way to force the average start-up founder to think about this right is to say that for every exceptional person you hire, you will need to make 1000 people aware of the opportunity.

WHUUUUUUT. I imagine people are saying. So if I want to hire 10 people I have to reach 10,000? That’s crazy, I don’t have time to do that, and it sounds crazily inefficient.

I think that’s the reality. You want someone truly world class, who is a great culture fit with your team and who will get obsessed with the problem you’re solving? Then 1000 people is a good proxy for the job you have ahead of you. And if you’re listening to this being like “yo, but the first person that recruiter sent me was perfect, who is this crackpot”, you’re probably not setting the bar high enough or you got very lucky.

So how do you make 1000 people aware of your role? There are 4 main things that I’ve discovered that make a real difference:

1. build a community that doesn’t yet exist around an interest that people who you want to hire have
2. hire your users
3. produce unique content that people you want to hire want
4. get out there

1. build a community that doesn’t yet exist around an interest that people who you want to hire have

So for the first one, this is kind of simple. If you can spot an opportunity invest your time in helping people who share your interest connect with each other. That typically results in an opportunity to reach a large number of people you’d possibly hire at scale. Some examples:
- when we started the Hacker News meetup, we figured that it would help people interested in start-ups and technology in London meet each other. We thought that beyond our interest in sharing ideas and support with other start-ups it might lead to a hire or two for us and others. It did and one of our longest standing team members, Dan Lucraft who is a truly exceptional guy joined us via those meetups. He’s the guy with his hand up in this photo at our annual festival trip. Some other examples: 
- the news.yc job board is a great example. News.yc is an authentic community but has also been an inspired way to make the worlds best hackers aware of YC and apply, and from there help those start-ups to hire
- Stack Overflow’s entire business is predicated on this insight
- We recognised that the London technology start-up community was being dramatically outspent and out marketed by the big banks and companies like Google in reaching new computer science graduates so we created Silicon Milkroundabout as a community jobs event. That has lead to close to 1000 hires for the London start-up community as a whole and some key people joining our team in the process

So if it’s such a great way to hire, why don’t more start-ups do stuff like this? Bottom line - organising a meetup for 1000 people takes up a fucking lot of time! And it involves talking to a lot of people you don’t know, which many people who just want to get on with building a great product don’t enjoy. It seems excessive as an approach to hiring 10 people. But I’d argue that it could be one of the best things you spend your time on as a founder.

On the off-chance that you actually love the idea of doing that sort of thing, we’ve decided to spin out Silicon Milkroundabout as its own start-up, from Songkick and are looking for co-founders to build that company going forward. So if you’ve spent time thinking about how to fix recruitment let us know.

2. hire your users

This is one of the most epicly scalable ways to reach 1000 people who might be a great hire for your team. If you’re a growing early stage service you might be reaching tens of thousands or hundreds of thousands of people who care about your market every day. Some of whom are developers, some of whom are designers, some of whom would love to work on partnerships for you. Put the time in to engage them in your jobs. From a jobs page that really articulates your company culture and gets people excited about open roles and a career with you, to creative ways to engage the people who engage with you.

I love this Easter Egg in SoundCloud’s source code “You like to look under the hood? Why not help us build the engine? http://soundcloud.com/jobs”

3. produce great content that people you want to hire want

This a really great technique for reaching people at scale. One of the hires I’ve struggled with the most at Songkick is a truly exceptional sales person. Someone I can entrust the biggest and most evangelical sales meetings too. Just like every other role I’ve hired myself out of, someone better than me at getting people excited about working with us.

I’m looking for someone who is kind of a needle in a haystack. Someone early in their career, who will be charmingly determined in service of Songkick’s goals who is personable, creative and brings a hacker spirit to sales, who is on course to start their own company at some point. So I started thinking back to what that person would be looking for as they planned their career. I figured they’d be reading a lot about start-ups and trying to figure out where they fitted in. I wrote a couple of pieces for my blog about what the hustle looks like at a start-up which got over 10,000 visitors between them. I’ve gotten hundreds of applications for that role from that and some of the best people I’m interviewing have come from that.

4. get out there

You can do all the super scalable stuff in the world, but for senior hires, often the only way you’ll know someone might be bored in a role, or a potential fit is if through your network. Unfortunately I don’t really know any scalable hacks there. You just have to put in the time. Help people out in London’s start-up community. Help other start-ups hire. Make intros. Stop to give the advice you’re asked for. Show your true colours as a founder or team member. And eventually people start helping you with some of the hardest hires you’ll make.

BD.

Whew. So that’s some of the stuff I wish I’d known about sales as it applies to hiring. Let’s move on to the equivalent for BD/selling to customers.

So if sales in general is about talking to people you don’t know. BD is basically about persuading people you don’t know to do things with you no-ones ever done before.

If that sounds like a challenge then it is. Hopefully once you’ve successfully done that a few times though, you move into what I think most people call ‘Sales’:

persuading people you don’t know to do things with you that someone else has done before.

I’m going to focus on BD, because I think it’s probably more helpful to discuss the bit you’ll do first, where the sale is harder. In some ways you could think of it like this:

BD: Product Discovery :: Sales:Product Execution

So BD is closer in spirit to the early stages of customer development and prototyping that many product designers will be familiar with. The difference is that rather than building something for an end user, you’re building something with another company for both of your end users.

So 8 lessons I’ve formulated about how to do distribution centric BD well. The rest is a reformulation of what I wrote here. So go there for the BD theorizin’

So hopefully all this has been a helpful guide through what I’ve learned about selling at a start-up, and the role that plays in building a company. I hope it’ll help you avoid some of my mistakes or at least know when you’re making that mistake earlier! I hope it’ll help you all hire better, and partner better and I hope this make a tiny difference to London fulfilling its potential as an amazing place to build technology companies.