Overview of the Five Stages of Blitzscaling | Blitzscaling 01

The power of entrepreneurial ecosystems like Silicon Valley comes from far more than just providing a fertile environment for startups. Starting up is just the beginning. Scaling up is how you change the world. The kind of scaling that built giants like Google, Facebook and Alibaba is so different from traditional single digit growth, not just quantitatively, but qualitatively as well, that it requires a whole new blitzscaling, a relentless speed that overwhelms your competitors and the market. This podcast takes you inside the CS 183C classroom at Stanford University where Reid Hoffman, John Lilly, Alan Blue and Chris Yeh explain the principles of Blitzscaling and discuss them with some of the most impressive technology entrepreneurs and company builders of our time. This is session one. This lecture lays out an overview of the course and provides a summary of the five stages of lit scaling. This podcast series is produced by Greylock Partners and for more podcasts, class notes, slides and videos, please visit greylock.com thank you for coming.

Let's see, so I'm going to introduce my three co instructors and then John will I guess take it from there, including probably saying something entertaining about me, although not to put the burden too high. So Alan standing here is my co founder at LinkedIn. He and I were actually at Stanford the same years. We did not know each other then we got introduced to each other through the Valley Network on my very first startup SocialNet. Our very first startup SocialNet and used to do things like craft gaieties and everything else which the Stanford students will remember. Chris Yeh who is here in the front is my co author on the book the Alliance. We are also working on a book on this subject of Blitzscaling as well which is part of what conditions this class. John Lilly who is here is the only one of the four of us with being a having been a professor for an entire quarter before. Well not a professor, yes, lecturer. Lecturer, yes, I remember the teacher and has done that at the D school and some other places and was the CEO who scaled Mozilla and is now partnering with me at Greylock and I will let John.

Oh yeah, I'm pretty bad with Mike so we'll just have to sort this out. So yeah, thanks for coming. So Reid and I have collaborated a long long time. We also weren't didn't know each other at Stanford. We got to know each other about 10 years later introduced through a friend of ours who was at Stanford. The connections you make here are pretty critical and very very very long lasting and the connection the work you do with groups Here, the people you meet will have, like, impact your career greatly. And we'll talk about that a lot during the class. So Reid, founder of LinkedIn, my partner at Greylock's, been on the boards of any number of companies, was one of the early guys at PayPal, Socialnet, Apple, a bunch of other places. Well, not early at Apple, but he's not that close. Yeah. Anyway, so. Well, we should just talk. So, yeah, let's talk about it. So, legal disclaimers. Legal disclaimers.

Sweet.

All right, team. Well, as the modern world of education requires, me to say a couple of things before you participate in this class. First, by participating in this class, you are granting us permission to use and distribute the content you create for this class, though you are still the owner and rights holder. So anyone who is planning to sign a contract based on the class, you. You still own your content. Not ours. These class sessions are going to be recorded, as you can tell, by the video cameras, and these are going to be publicly distributed. That means that while the videos are probably not going to show any students, if in fact you do not feel comfortable with the slight possibility that you'll appear on camera, you should move to one of the far corners of the room, assuming it was possible to move. But in the future, please do sit in the four corners of the room. We do not want anybody who does not wish to appear on camera to appear on camera. Similarly, if we're giving you an opportunity to ask questions and you don't feel comfortable asking your question, with the cameras rolling, the instructors and any guest speakers will stay briefly after class to answer questions that you did not feel comfortable asking with the cameras rolling. And with that, we are now legally clear.

All right, so cool. So just a couple things. Just quick background. So the class is sort of built on three different traditions. So when I was here as a CS student a little while ago, there was a class called Business for Computer Scientists. And a guy named Dave Liddell, who's one of the early guys at Xerox PARC and Interval and other places, got up and talked to us for a quarter about how to do a balance sheet, how to do a P and L, how to do all that stuff, and how to run a basic business. We're not going to do any of that, but it was a huge thing for my career. And the way I think about a bunch of computer scientists building businesses. The second thing that's worth mentioning is that entrepreneurship at Stanford is unbelievably well supported by guys like Tom Byers and Tina Selig. And people who have built entrepreneurship classes and scaling classes like Bob Sutton. So we'll talk about our particular brand of scaling, the one that we see and touch and build every day. But there's so much at Stanford that I think everybody should be paying attention to and be grateful that you have. And the third thing, the third sort of tradition it's built on is this is class is called CS183C. Two years ago, Peter Thiel taught a class called CS183 about startups memorialized in a book called Zero to One. Last year, Sam Altman from Y Combinator taught a class about startup school that's sort of the spiritual successor, which is how do you actually get from 0 to 1? And then this is in a lot of ways the sequel to that which is starting up is cool. But what's really cool is how do you build a big durable business at scale? And that's what Silicon Valley is really special for. So those are the three traditions and so stand on the shoulders of giants. You guys are very lucky at a very lucky time at Stanford. So that what you shouldn't expect from this class is a few things. So you shouldn't expect us to teach you how to read a balance sheet or P and L or do financial modeling or any of that stuff. You shouldn't expect any of us to agree with each other very often. We're going to talk about a lot of things. Exactly. So. Right. You shouldn't expect us to be serious all the time. Yeah. And you shouldn't expect a playbook like this is not how to pitch us to be to do vc. This is not how to get a company funded. But this is how to think about. What you should expect is how to think about how to grow companies really big and really make the fundamental companies. You should expect us to get into it with the guest speakers who are coming. And we have a lot of amazing guest speakers who are coming. And you should expect us to answer questions and engage with you and we should expect you each to learn from each other as we post content to the LinkedIn group and to medium collections as well, which we will get to at the end, which we will explain in just a little bit. And then the last thing I should say. And Sam Altman had a very good comment at the very beginning. He was a little bit self conscious last year about teaching a class because he thinks that his point of view was you should only start a company if you're really dying to start a company. And so encouraging people to do it is a little bit scary because the job of starting a company is such an intense, hard job. Really the only people who should start companies are people who can't not start companies. So we're going to say a lot of things. It might be relevant to your company or your startups or your ambitions and they might not. Your mileage may vary. So just fair warning, you can ask questions today when we lecture. When our guests come in, we're going to do more moderated. But today and when we lecture, you can be pretty free flowing. Just raise your hand if you have questions.

There will be a way to submit questions that we will then edit before the class when we're having guest lectures. So we have it highly edited and useful to the group. The other thing in terms of the mileage may vary is our target here is not a playbook. Our target is essentially shining a light ahead. Because the general myth around entrepreneurship is that you just have an idea and it works. And actually, in fact, there's a tremendous amount of innovation, hard work, skilled activity and everything else that goes into this. And so part of the idea is it's not a simple recipe. It's not insert capital, insert a little bit of technology, stir. It happens. So there's heuristics, not rules, there's kind of ways to think about this. And so that's the kind of thing we're doing. And it's more or less big concepts. It's kind of what are the concepts? As you're beginning to think about this now, one of the things that we, when we started this work, we're still actually looking for a better term than this. Blitzscaling. Might as well go to the next slide, if I recall. The next slide. Yep. Which is that in fact one of the things we think we need here is kind of a specialized term for this. And there's things that are good about this term, which is the speed of scale, the speed of deployment on a global basis, the speed of building an organization. Something that is crafted as a term of art. There are parallels between business strategy and military strategy. So that's okay. It's less okay because it's not universally military. And so we're still looking for this is part of what we're working out. Because by the way, just like any entrepreneurial thing, we are working on the book and doing this as we're teaching this class. And so we are doing such things as thinking about this term and saying, does this term actually really work? So this is the classic mythos of Silicon Valley, which is. It's a land of startups. It's a land of essentially, you don't have kind of a culture of fear of failure, that you're not penalized. When you try something and fail, you can try it again, that you can assemble a group of founders here very easily. There's venture capital universities such as Stanford, and there's a way to make that happen. And this is the classic story. Frequently what I find from talking to young entrepreneurs, they just think they get their app right and it works. You get some capital, people love the app, and then you're off to the races. This is the classic story about what makes Silicon Valley strong. And that's partially true. If you don't have that previous story, you're not going to succeed. Right? So actually, in fact, figuring out how to do that effectively is actually one of the things that's really important about the beginning of entrepreneurship. And that's what you see in many entrepreneurship classes. How do you select the founder? How do you know if the idea is right or not? How do you get your initial financing? How do you figure out what the competition's doing, whether it's relevant, whether Google or Microsoft is doing this, These sorts of things, those are all actually important to succeed in this journey. However, there's a problem with the story. The problem with the story is that actually, in fact, when you begin to look at the whole world in terms of the ability to assemble 10 or 20 people, do a initial idea, have the idea about how to distribute it in the App Store, how to distribute it in a kind of on SEO or virality, in terms of the web, how to make all of these things happen. You actually, in fact, I have visited at least 20 places personally where you can assemble 10 to 20 people where they have enough knowledge. Venture capital has gone global. This is all actually, in fact, something where you can do a startup in many areas of the world. And we say, well, there's still a culture here, there's still a network. That's obviously true. There's still a differential edge to Silicon Valley. But now the world knows that actually entrepreneurship is a very good thing. That actually having people take a bold venture effort to make something happen is part of how you create the jobs of the future. That technology is transforming industries and this is something they want. And so the question comes down to, well, why is it that Silicon Valley still creates a massive number of very interesting companies? Why is it that this place is still so unique and startups are part of it, but actually the ability to scale is a key portion of this. And the notion of scaling revenue, scaling customers, and actually scaling organizations. And how do we do that and how do we run that playbook in a consistent fashion? Not to say that it always works, because this is all venture, remember, but in a way that shows massively differential results. What is the underpinnings, the risks, the opportunities, the decisions that go into that? That is essentially what the class is about.

This is what we talk about when we mean big. So we just did a quick scan of the companies that we know about in technology that are 10 billion or bigger. There's not a ton. 10 billion is a pretty large number. This is the public companies that are bigger. And it's worth noting that these are all Silicon Valley, except for Tencent and Alibaba. Everything else is Silicon Valley. And if you note, they're speeding up. So there were four in 1998, 1999, Google, Tencent, Alibaba and Salesforce. But now they're starting to speed up. You can start to see more and more value creation. And so this is not the only way to judge how large a company is, how big a company is. But it is worth noting all Silicon Valley and a couple of Beijing and Chinese companies. And then lately, obviously, lots and lots and lots of unicorns. This is the best unicorn picture I could find. I was looking for a Creative Commons unicorn herd picture. Anyhow, this is the best I could find. So I kind of. It's kind of growing on me though. So anyhow, realize what your Christmas present is now, right? So good, right? Think unicorn. You know, our friend Aileen Lee popularized the term unicorn. It's worth mentioning, like at this point now there's unicorns, unicorpses and like dragons and all this other stuff. Like, and the billion dollar thing is kind of a goofball, goofball metric. She was trying to say, look, there are more big companies getting started now than ever before. There's something unusual happening. And that's her main point. And so we tried to quantify it. So we're looking through the crunchbase and I guess I should say these are all paper unicorns. These are all paper valuations. Companies are worth at some level what people will pay for them. And until a market gets made, they're all sort of at some level, pretend valuations. Having said that, let's just look by region, what's happening. So of the top 10, you can see Uber and Airbnb, Palantir, Pinterest, Dropbox, Silicon Valley. So about half the companies the Two in China, Xiaomi and Diddy Kuaidi are in Beijing, Snapchat and SpaceX are in LA. But I would argue have profoundly Silicon Valley roots between Elon and Evan and Bobby and then Flipkarts in Bangalore. So if you play out and say, look about the top 60, it looks the same. So you add 23 more Silicon Valley companies, a few more Chinese companies, you pick up some New York and Europe, and then elsewhere is a couple in Florida and, well, not many other places, honestly. But here's the kicker. You look at what the population is that produces each of these things, 7 million people fewer than the population of New York is generating half of the unicorns to date. By crunch basis metrics, there's something interesting happening that's just qualitatively different than anywhere else. And so the question is, what? And like Reed said, it's not starting up, it's how do you get really big?

So part of the thing that what we are going to be illustrating here, and part of the way that we're going to be doing this, and this is the reason we're going to have a number of guest lectures, is there isn't, as I mentioned, one playbook. What there is is a kind of a set of knowledge and practice, a set of things in terms of how to make this work. And part of what we're going to do is bring in some of the people who actually run this race who do this and talk with them about it. All of us have, which is part of what we're here, but we're also going to bring in folks from other companies and say, how did you make this work? What are key messages and why does, as a way to try to illustrate what is it that we know here in Silicon Valley, what is it we have here in Silicon Valley, and what is the way we play this game that actually can be helpful to entrepreneurs here, to executives here, but also hopefully everywhere in the world. The degree to which it's relevant will depend a lot on capital in the area, technology in the area, available talent and a bunch of other things. But the goal is to actually shine a light that's actually useful to everybody. All right, so one of the things that. Let's just keep going because we've talked about scaling enough. Okay? So one of the key things that you'll find us talking a lot about here is essentially the importance of networks. And obviously, when I say that people tend to think that I'm only meaning LinkedIn. LinkedIn is obviously born out of that idea, but it's actually similarly a projection from the fundamental idea. And so networks also are not like some people say, oh, you mean Cisco or IP routers or these sorts of things. And it's not, that's not. I mean, those are a very important part of this network and part of being part of the network age. But, but those also are not the networks that I'm fundamentally talking about. The networks are questions of people. What we have, one of the things we Talk about @ LinkedIn is the knowledge graph. So it's companies, people, jobs, skills, universities, how these all relate to each other. Those are the kinds of networks that we're talking about. And one of the things that, when you look at why does Silicon Valley work so well, is the networks of, of a bunch of different types all interwoven work very well here. And that's the thing that creates networks, being amplifiers, where the network can actually amplify what you do. There's a number of people that I meet who think that they're in Silicon Valley and they just happen to be geniuses and that's why they can create stuff here. Actually, in fact, the network is very helpful. You might be a genius, that may actually, in fact be true, but it's actually, in fact, part of the key movement frequently is locating the company here and building it here, because you're deploying the networks. Now, I don't think those networks, I think it's possible to build them everywhere, anywhere. I think there's some kind of organic luck that comes into it, but I think there's a set of cultural things, set of communication things, set up, ideational things that get into creating networks. And so here are some of the networks. I mean, some of it's talent, some of it's capital, some of it's know how, some of it's people and what's key. And this is the reason why, when you begin to say, why is it that we are in an accelerating age where more globally impactful and transformational companies are happening within Silicon Valley? The answer is that we're in this networked age. You're much abler to get to lots of people all around the world very fast now. They can too. Theoretically, in a networked age, you should see a dispersion of essentially unicorns, dragons, unicorpses, et cetera. You want to say something?

Yeah. Well, I would just say that this is built on so many years. And I mean, you hear Fred Wilson or somebody talk about New York and the emerging network and he's like, look, New York is emerging as a technology network. But Silicon Valley's got probably 60 years on us. Back to the guys with names on the buildings and all around campus, whether it's Hewlett and Packard who returned students to the Yahoo guys to Google, it's just building layer after layer after layer. And what's happened is you've just gotten a huge diversity of roles and talent, from funders to strategic people to product people who all understand networks and are all like investing in the network over and over and over. And so I think what Rita is right, like, you can do this anywhere. It takes a long, long time. And it's like, we'll see, we'll show you lots of graphs of companies and they almost all look flat, flat, flat, flat, flat, flat, flat. And then something happens and the network starts to get internal consistency and liquidity and take off. That happens again and again and again. And like Silicon Valley was mostly flat for a really long time. And it got kind of Hewlett Packard at Intel and Fairchild, and then it started really ramping in the 80s and 90s, and now it's pretty good shape, late 90s specifically.

But yes. So that's the subject of what we are trying to do, and that's what we are calling blitzscaling. Now, why don't we go to the next slide? So these are the things that you will hear a lot of. And part of this is we've deliberately kept this. We're not trying to do a masterful orchestration where you only hear each sentence only once. Part of having guest lecturers in and so forth is there are things that you will hear on a repetitive basis. That's useful information. You will hear people disagreeing on some things. That's useful information. Because there isn't just simply one strategy for making this work. As a matter of fact, we don't just embody one strategy here in Silicon Valley. But there are some common themes that you will hear. These are some of the common themes. So one networks, we've already gone through that in some depth and you'll hear a lot more about it in this quarter. Also, in fact, part of the thing about compounding to scale, so how is it that you get a revenue model that feeds back capital into scaling an organization both locally and globally and making that work, or scaling the way that you can pitch a financing so that you have a lot more capital to fund the growth of the organization? And one other thing I think it's probably worth to say is that there's this interrelationship between organization Scale, revenue scale, and customer scale. Ideally, if you actually talk to most of the accomplished Silicon Valley entrepreneurs, they try to keep their organizational scale as trim as possible for customer scale and revenue scale because it maintains adaptability, it maintains ability to grow. However, as you really begin to get to revenue scale, as you really begin to get to customer scale, where you are essentially having reasonable customer service, although those are some of the hacks we will get into, you actually begin to need organizational scale.

We'll explain it. We're already starting to use jargon. So one of the things you will not believe, the number of times we're going to say the word distribution in this class, it's going to be a lot, I promise you. It's because we say distribution a lot in our daily work. In every company, we talk to everybody, every pitch we see, we talk distribution, distribution, distribution. But I would say that we're going to explain some of these terms as we go. If the terms are not totally clear, we'll try to de jargonize them. We're very, very, very contextualized. So raise your hand if you feel like we're too jargony and we'll slow down and explain stuff. Yeah, all right. All right. Oh, wait, yeah, good. Yes.

So I'm not obviously going to read all of these questions, but this is a subset of the questions that change as you scale an organization. This is the kind of thing that you think, okay, are these the kinds of things you make the decision once at the very beginning, and then that persists as you move from you and your co founders to essentially thousands and more of people in the company. And the answer is all of these things change the way that you do them, the way, the way you think about them, and they change at these different orders of magnitude of scale. And it isn't that you actually, in fact try to pre program them, because if you don't win at the game you're playing, you don't get to play the next game. But if you see that the next game is coming, then you can kind of be ready for it. When you get to it, you get to it quickly. You can exploit advantages that you see relative to your competition, relative to capital, and that's part of what, how this plays. And so, for example, one of the key ones is like, how does hiring change as you scale? For example, Anil Busri, who is the CEO and co founder of Workday, he and his co founder, David Duffield, who was the founder of PeopleSoft, interviewed every single person that joined the company until there were 500 people because part of their insight was keeping culture is really important. Until you get the first 500 all locked in. They were going to interview on cultural basis. But even at 500, that changes because they can't do that to 10,000.

Although Larry and Sergey did at least do 500, maybe more.

Yes, exactly.

So that's a little bit mythology, so it's hard to tell exactly how long they did it.

Yes. Although I think actually Larry still reviews a lot of the CVs, I think, for views. Yes.

I'm going to use air quotes a fair amount during the class too.

Exactly. For example, another one that gets this is how you should think about competition. Frequently when startup folks pitch VCs, what they say is, okay, well, I'm worried about Google or I'm worried about Microsoft. Almost never as a startup is that your real competition, your real competition is other startups. Because all organizations have three to five things that they're really targeting. And unless you happen to say, actually, in fact, what I'm doing is I'm going after search, then yes, actually, in fact, you should worry about Google as competition. But if Google has one of its users, 200 products, and you happen to be competing in some angle for one of them, that's actually not the really relevant issue. However, as you begin to get to an organization of scale, we're actually deploying having a bunch of customers, having a revenue stream, then actually, in fact, the competition tends to become much larger companies. And it tends to be that not only are you competing with startups or other folks who may be in your class, but you're also competing with the industry leaders in certain ways because they may have a leverage and they now may be focused more on your area. And that's kind of a sense of how these are. And there's a ton of these questions, and we will go through them as we're going through the class.

But it's hard to talk about scale without putting a little bit of specificity around it. And these are super rough, but we're trying to think about orders of magnitude of company. Yeah.

So basic idea metaphor is family, tribe, village, city. It's on the order of magnitude of number of employees. And there's actually a sub theme here that's there's kind of tens and threes, and there's a sub theme of threes that we'll also touch on lightly in some places. But essentially it's you kind of your initial everyone in a room, everyone in kind of an apartment or a large apartment. House, maybe. And then it kind of goes up and everything changes. You go through this. But there's other scales that matter, too. And this is all very rough about kind of like your consumer traction, your B2B traction, your revenue traction, and all of these relate. And this is not meant to be that anytime you're here, you should be here. There's differentials about what your market may be, what your strategy may be, what your competition may look like, such that you may be here and here. You know, there may be various kinds of combinations, but it's partially what gives you a sense of where are you on this massive scale evolution.

Yeah. I guess the point is that what we're trying to say is that when it's three or four founders, it's a super different enterprise than it is when it's 15 people. And somewhere between 15 and 100. Things really change a lot, too. It's the same kind of deal where between zero revenue and the first million in revenue, there are really profoundly different things about the company. Some things will be consistent, many themes will be consistent, but the activities in the work changes. And so, like Reid says, it doesn't always read all the way across. For example, WhatsApp obviously breaks the mold. Like, 19 people, Instagram, 19 people and like 600 million users or something. You know, when we invested in Kevin and Mikey and Instagram, I think they had 13 people and they were headed towards 100 million users. So there are things that break the frame. What we're really trying to say is usually employees correlate with users and revenue, give or take. There's a lot of things changing. For this class, we're going to talk about organizational scale because it's the easiest for us to talk about our own complexities around hiring, around how you go to market, which means how do you.

Sell and other things, or how you distribute distribution. Hold on. Don't go to the next slide yet. So, roughly speaking, we're going to spend two weeks per section. It'll probably be extra focus on Tribe, Village and City. This week and next week are essentially the startup class. That's the kind of family, like, how do you pull stuff together? We'll go a little bit to who we selected to come in and why we did that towards the end of today's class. But the idea is essentially, how do you essentially launch from that into this? And as you're thinking about entrepreneurship, how do you think about what this growth and this journey looks like? And so we roughly two weeks per stage, and it'll depend A little bit on people's availability.

And yeah, we try hard to put together a pretty robust and amazing speaker list. People who I think will, we think will give you guys the most interesting insights. But the rough structure of the class is Tuesday, Thursday, Tuesday, Thursday in a 4, 4 class section, we'll do a lecture like this on the scale. And then the next three classes will be guest speakers from the outside who talk about what it was like in their companies to grow it. And we'll do it often be a moderated conversation. So we'll have Jeff Weiner in later in the class for the very large company, we'll have Selena Tabakawala, who's a CS graduate, who's the president at SurveyMonkey, come in in the village section. And so we'll do that. But that's roughly the section. And like Reed says, we'll reorganize it because some of these people are fairly painful to schedule. And we'll also move, most of us will try to be here for every class. That won't always be the case because Reid has some travel, I've got some travel, Alan's got some travel.

So this is a way of thinking about, and it's not exhaustive, but this is a way of thinking about what we're walking through. Because you say here's a different organizational structures and what happens when you're thinking about all of the different parts of a company. Right. So people is obviously pretty fundamental. So it's what we start with. But then also are you a single threaded or multi threaded product company? Always as a startup, you're single threaded. When do you get to multi threaded? How do you make that decision? How do you know it's coming upon you? How is your go to market? Is your go to market one simple thing. Is your go to market a plan that's an enterprise based, a consumer based even there's differentiation within those plans. Some enterprise is kind of classic heavy field sales. Some enterprise is essentially telephony. Some enterprise like Slack is an entirely new model. And then part of that then gets down to what's your technology strategy. So for example, frequently in the beginning of a company you actually in fact trying like one of the quotes that some of my friends, although not this one's not John, although I will probably John occasionally tell me that I will never live down is that if you're not embarrassed by your product release, you've released too late. The whole point of that quote is to say the importance of speed and the importance of time and your general get to market. It does not mean that, for example, you're launching a hardware product and you're embarrassed by your first product release, you're probably also dead. But for consumer Internet software, it's the importance of speed. And part of that actually then gets down to what your tech strategy is, because you say, well, we're going to build super robust technology and we're going to have that technology from the very beginning, and that's going to be our OS1 strategy. Then the likelihood in a consumer interface is you're likely to actually in fact be developing too slowly and you're not getting the market fast enough. And so, for example, within consumer Internet companies, it tends to be the how do you get the thing up and then how do you rebuild it as you're going becomes part of your technology strategy. However, if you did that the whole way through here, then somewhere around here you're going to die because you're not going to be able to. That pattern which made you win here isn't going to win here. At that point, you actually start having to think about how is it we're building a platform, how does that platform actually make a development stack that makes everyone more productive, how do we have tools that do it the right way and all that sort of thing? And that's part of how you begin to look at what this range looks like.

Yeah, so that's the deal. We're trying to put together a metaphor or like a little bit of a chessboard for how to think about how to go from nothing to a really big robust company. And if you think about most of the startup school and startup talks, they're all focused on OS1. How do you get the people product and go to market? Right. Maybe technology. And if you think about just those things, then you tend to fall down to other places on the board. And so we're trying to help you think about four different types of companies. And we happen to be best at consumer, Internet and enterprise software. But four different categories of company. How do you fill out the board?

Yep. And that's part of how, when you're thinking about when you're listening to the Fireside chats and the guest speakers and us, you should be thinking about kind of what is in the positive column to watch out for what is in the negative column for how you can die and how it plays in. And this is only a partial list, part of the reason why this leads as new functions is that part of the thing that happens is suddenly you have to start doing corp dev and buying companies and that becomes part of your strategy. There's a bunch of things that, as you go across here, there's new functions. And so even though like hiring, you might hire your first HR person somewhere in here and start doing an HR process here. Right, Disagree.

GTM is sales and marketing. Sorry.

Yes, yes. Okay. Yeah, all right. But there's a bunch of other new functions. And so now particularly to hit the inflection, most of the time this is where you're actually figuring out your inflection and figuring out whether or not you actually have a real blitzscale opportunity. And this is sometimes you may spend a bunch of time here and sometimes you may move very quickly. And so we're going to focus pretty intensely on this area, but you also need to see what's going on here. Once we clear these two weeks, we won't go back to the startup stuff that often because we feel that's relatively well covered in a number of different classes at Stanford. So tens, hundreds. And by the way, part of what this means is when you say ones, this is actually probably to roughly 12 to 15. This is probably roughly to 150. If any of you don't know what Dunbar's number is, you should look it up. D U N B A R and this is essentially goes into the hundreds, which is, call it 200 to 500, 600 as a way because it depends a little bit on how you're operating. Exactly. But and global distribution. And are you scaling customer service? Are you scaling your central product development organization? And a bunch of other things. But that's roughly what this is. So here are some general observations when you look at the road ahead. And part of the point of today's class is to give you some frame for thinking about what our next lectures and our next conversation is going to be. So first question is when do you blitzscale? It is actually not in fact that you say I've got an idea and I go find my couple of buddies and I go blitzscale right away. That is not actually what you do maybe once out of 1,000 or 10,000. But the question is what speed you're operating at is partially an exercise in judgment and intelligence about what does the competition actually look like? What is the way you're going to win a 10 year game? Because very rarely are these games one year games, they're usually 10 plus year games. Now you may have to get ahead of the competition in the next year and the next year may be super intensive in terms of the way you do it. But what's the way to do that? And then the question comes down to is, because if you example, you decide to hit the afterburners now and you're. And your business model isn't ready, your company actually isn't ready. That's one of the ways that actually you miss a curve and you die. So it doesn't mean don't do it, because sometimes you have to do it competitively. But that preparation for it and the judgment of it and the execution of blitzscaling actually really matters. The next trend you'll find is that as you're going through the orders of magnitude of scale, you're generally speaking moving from generalist to specialist. It isn't that you ever get rid of generalists in a company, but when you start with the first five people, they're doing everything. You're buying office supplies. I'm heading out for pizza because the other folks are coding. So my job is to go get the pizza. Actually, we both did that on occasion. So what you do, though, is everyone is actually in fact responsible for a number of things. So even if you think about technology, stack and say, look, I'm actually building the technology, you actually even have generalist technologists. If you have someone who says, look, all I'm really good at is kernel code. Well, if you're building an application, that's not going to help you that much. You actually, in fact, are looking for in the early stages, people who are much more generalist, much more flexible. Because you also may be moving around in terms of the classic jargon, although accurate jargon now pivots and everything else. You may be trying to figure out what you're doing. So you need people who will do things they're not comfortable with, learn it quickly, et cetera. But as you scale, you will hire more and more specialists. Specialists at technology, specialists at sales, specialists at management, all these sorts of things. And that goes to the third path, which is as you scale, you will move from everyone in the room doing and doing just about anything that needs to be done to people who are some people who are doing and some people who are both managing and doing, also doing, to okay, some people are just managing and eventually to executives and part of what executive is actually. In fact, as you get to an executive, your primary function becomes the organization. How do you compose them? How do you have them operate as a team? How do you essentially have scaling people up? How do you have onboarding all the rest of that? It's not like, oh, I articulate vision And I stand at the helm and point in the direction. That's usually a pretty useless executive. Right? It's actually people who are actually in fact working on the organization. And so you'll see that as a pattern. Another one is it isn't that you do innovation first and then everything else is this kind of thoughtless scale that almost never works that way. You actually are in fact working to preserve your ability to be innovative as you're scaling the organization. Because there's lots of things that you actually in fact need to innovate on. You need to innovate on how you're managing data, you need to innovate on kind of like what is your go to market and actually how are you transforming the way that you're acquiring customers. You may be innovating depending on consumer. Companies tend to be a lower number of product lines, enterprise tend to be more. Again, all of these things are heuristics, not rules. But you may be innovating on how that's functioning too. And so you have to both scale while you maintain innovation. You also frequently will encounter a choice of are you preserving adaptability or are you doing operational excellence? And part of what businesses and kind of theory of capitalism very good at is saying, how do you drive your unit cost down? How do you make it more efficient to produce a service, to provide a service, more productivity on the employee? It's kind of a classic tailor industrial metrics. Those are actually in fact still valuable. But part of when you're operating at speed and kind of doing this kind of blitzscale, sometimes you actually make choices on adaptability. You actually have wastage. You actually in fact go, that's okay. If we actually in fact hired way too many people. So for example, one kind of early PayPal story. So this is kind of Peter Thiel and Max Levchin kind of co founders. We were growing at between 2 and 5% of user base and transactions per day. And I presume that most people in this room have good enough math to know how that compounds fast. So, yes. Right. So that basically meant that we were going in the whole. By the second week, we were going 20,000 customer service, new customer service emails in the hole per week and growing. That led to essentially having. We were only listed in Palo Alto enough angry customers that they could, they figured out which city we were in. They were dialing extension numbers in the office at random. And 24 hours a day you could pick up the phone and talk to an angry customer. Right. So, you know, so when you, when we're doing okay. We're dealing with that kind of scale issue because the product is canning away from us. The way that we dealt this is we weren't going operational excellence. We're like, oh my God, we gotta solve this problem right away. So what we did is we literally flew. We decided to build a customer service center in Omaha and we literally flew out, you know, groups of employees to do group interviewing a customer service so that within two months we would have a 200 person customer service department running to answer that. We churned out about 70% of those employees within three months because it's churning through. Because that wasn't. We were not. We were doing the opposite of operational excellence, but we were focused on getting it up and adapting as we were going. And that's a frequent choice that you will make in sales, technology, customer service, et cetera. The sixth one is global reach, which is essentially the fact is a part of the network age is that you actually get your global faster than you imagine. So for example, when we launched LinkedIn, we had 12 companies in the 12. 15. It was some in the countries. It was 12 to 15 countries in the drop down list. 15. And we added them as we got people complaining, my country's not in it. That list got long very fast. And what's more, even though reasonably educated, I came here along with many of you, like Faroe Islands, I didn't actually really know was country. Remember looking up Faroe Islands? Yeah, like okay, so you get to global reach much faster. Capital requirements. You basically cannot blitzscale without heavy available capital. And that comes from one of two mechanisms that either comes from a good revenue model that you're reinvesting or it comes from capital markets that are essentially flowing. Now that doesn't mean you can't blitzscale. Only capital markets are, oh, financing, venture capital, debt, IPOs, ways of getting money. Although IPOs are more than that too. And so you have to have capital in order to do that. Now you can blitzscale even and down markets because it's a relative metric.

Right.

Speed is relative. And so it's just a question of how do you move faster in a network age than available competition.

Yeah, this is a super current debate and if you look at almost any blogs of VCs right now, there's like a lot of people wringing their hands about the environment. And I think this is legitimate. Like it's a very overheated environment. Things are very expensive, lots of companies are raising big rounds and so like lots of VCs you know, including us. Like, we're concerned, get concerned about burn rates. And so then the conversation will be, well, the tension is between how much you spend and whether you can go win the market. And so you get in this funny cycle of, like, trying to win the market, but also not trying to increase burn rate, which is how much money you're sending out the door every month. And so it's a real tension and it's a very, very current question. And Uber Lyft, all these guys, everybody who's growing is looking at and balance between unit economics, which is how much money do you make on each transaction or lose on each transaction versus how much money do you spend to go take the market?

And if your burn rate gets out of control and then the capital, you don't have it on revenue and the capital markets die up. That's another way, which in the first Internet boom was a way that you had Internet winner. That's the kind of thing that blows companies up. Yes. So I think that's good enough because we talked about 8 and 9. So this is a high line of kind of thinking about how, roughly speaking, we'll publish these slides, so you don't need to take notes on them and so forth, but it's kind of a way of thinking about kind of what happens when you're going between them. And we'll return to these themes as we're going through them. Obviously, right now we're in the family area.

Okay, so. Hey, everybody. So I wanted to give a kind of a brief. I wanted to give some meat to the story that just got told about those operational stages or those organizational stages. Here's one thing you gotta keep in mind as we go through all this stuff. There is no one story. Every single company that's passed through this stuff has passed through many different paths, some of whom wouldn't even find it familiar. We wouldn't recognize it at LinkedIn, but you might recognize it at workday or wherever. So I'm going to tell a story about how we pass through these phases for LinkedIn to try to give you an idea of what it actually feels like to be in each place and some of the decisions that we actually made. And hopefully it'll make some of that stuff and we'll actually come back to that list of one through five, because a lot of the themes line up really well at LinkedIn. We were one of those companies that did not blitz scale at the beginning. So basically, at the very beginning of the company, we spent two years in phase one.

Right.

Which for a company like Instagram or WhatsApp.

Oh, yeah.

Well, I'm not going to spend too much time on these. You can see sort of the length of it, but basically it took us a little over 12 years to sort of get where we are right now. Can you go next?

And also, this is the thing you're talking about, the two years of employees.

Revenues and other stuff.

Yeah. So give me the first picture. So these guys are the original. Well, most of the original founding crew of LinkedIn. This was our household back in the day. This is in 2003 and 2004. And basically we started the whole thing with a single idea. And I should explain really quickly. You're going to see a whole bunch of pictures that look like this, because we got a tradition, starting with this photograph, that when we reached major milestones in terms of user growth, and you'll understand when I'm done with this, why user growth was so important to us. You would take a picture of the people who are working in the company holding up the number of people who were in the network. So you're going to see several variations on that during this. Back then, we had a single idea of what we were actually trying to do. We entered, we discussed it in 2002, and in 2003, we set out with this idea. If you could build a professional network with reputable relationships inside of it, it would be useful for a thousand different things that professionals actually do on a regular basis. That was the whole theory behind what we were doing. So we made it searchable, and the idea is we would get to a certain number of people, then people would start using it for search on a regular basis, and it would become a new way of doing business. That was basically the idea. Everybody we hired were people we had worked with before. These were all friends or former colleagues. Sorry about the notes. The organization itself was as lightweight as possible. Literally, we were borrowing the rooms that we took this photograph in. Right. And basically, we had only the absolute minimum for building out general administrative. We had.

You might want to tell the story of the whiskey.

If I have time, I'll tell you the story about the whiskey. So we had only the absolute basics for making things happen. So basically, all of our effort, every single moment of every day, was solving one problem, which is what's going to be valuable to the user. That was literally all we thought about and nothing else mattered. We did everything else at the minimum level possible. We released in May of 2003, and we immediately began learning about what product market fit actually meant for us, people familiar with the concept of product market fit in general. Just the idea that basically you're providing a product which provides value out into the market at scale. That's basically the idea we didn't really know. We had a theory, a hypothesis about what the market fit was actually going to be, but what we found out was that it was different. So we put it out there and it became immediately obvious that recruiters were going to love it. However, in order to get to that place, we had to build a critical mass of people for those recruiters to search. So we had our first notion of what product market fit actually felt like. But we didn't have is the user base necessary to be able to drive that product market fit. And that was what we discovered during our very first version. It was about discovering that fit. The second version next. There we are again. You can see the team's a little bit bigger. We had to build this team out because basically we hadn't realized what the product market fit actually was. And now we needed to build out minimal operation necessary for us to actually be able to attack that fit. So you can see these are actually the three co founders. There I am. And Reed, who wore his hair longer back in the day. And Jean Luc was our original head of engineering. Basically we found ourselves in a place where we had to go from 12 employees to roughly 30 or 40 employees to be able to support things. We also added a set of new functions, new things that we didn't have to worry about as a startup. Those were customer service and we added sales. So the go to market components that John mentioned a little bit earlier. And we added minimal gna, the general administrative functions to be able to do things like cut paychecks and manage benefits for our employees. So just the minimal stuff that we actually needed to do next. Okay, here we are again. Now we're in the parking lot because we no longer fit in the building, right? 13 million users. @ this point, I'm way in the back there in the village. For us, this became a place where we wanted to try to do two things simultaneously. So we wanted to be able to take advantage of the existing fit. That was a build a great recruiter business. But we also needed to explore additional fits. Basically we had a great fit with recruiters, which only represents about half a percent of all professionals. But we knew we had a value proposition for every professional. So the question is, how are you actually going to go out and find that? So in 2007, we broke our organization apart. And we added a ton of extra overhead because we needed to divide our R and D organization up into parts. So we went from one R&D organization to five R&D organizations. Five, five. And for what it's worth, we still have five R&D organizations at LinkedIn.

That was the tracks you're referring to.

Tracks, right.

These are tracks. Right. Each one had a different track of things they supported. Either they supported the growth of an existing business or they explored new stuff. It was our way of trying to balance operational excellence with adaptability. We wanted to make sure we had four of those organizations. One of those organizations focused on growth, one focused on revenue, and the other three focused on what would be valuable, what other product market fits actually existed to continue to allow us to grow. That required new leadership. When you get a company that big, we're now at 120 people. At 120 people, you need a different type of organizational leadership. So we brought in a CEO. Guy's name was Dan Nye. He came from Intuit and he came in with tremendous knowledge about building enterprise business and sales businesses. He had worked on QuickBooks and a bunch of other things for small businesses. He was extremely knowledgeable about that stuff. He came in and put all the effort in to make a sales organization really work because it was our ability to capture that marketplace. But simultaneously we had to bring in brand new product and engineering leadership to be able to run those five simultaneous lines of development.

That's one of the things we're going to talk about, I think a little bit during the class, because most people in Silicon Valley talk about founder or CEO. I was a founder. I hired a CEO to replace me. Reid was a founder, hired me to replace him. Then unreplaced himself, then replaced it again, Replaced himself again as CEO.

Indecisive.

Yeah, Reid is totally indecisive. So I think that knowing who to put in what jobs, and especially the CEO with respect to the founder, something we'll talk about through the quarter, I think.

All right. The city. So now we're in a totally different parking lot because now we're talking about hundreds and hundreds of employees. In 2009, we basically began blitzki. We hadn't really done it up to this point because remember, growth was our main limiter. If we didn't have a big network, we weren't going to be able to drive stuff. So basically we had to bring all these people in for to us to be able to basically take advantage of the growth we had achieved up to that point and continue to drive our efforts in those five product lines. But at that point, there were changing expectations for the way that our customers were using our products. So we had a recruiter product, we had sales product, we had marketing solutions, products, wide variety of things. And now the bar had to be raised on all of that stuff. We had to have people managing those relationships. We had to have sales people out there generating new things. A lot of our customer growth was coming from overseas. So now we're beginning to see growth outside the US So we brought in a new CEO to do this. This is Jeff Weiner, who'll be with us later in the quarter to talk about this process leading from stage four into stage five. Jeff came in, and the very first thing he did was he prepared us to blitzscale. So one thing we had never done, and this is a great learning for us, is we'd never written down our company culture. We hadn't written down our strategy because we were too small. We didn't have to do that. You'll find if you haven't worked in a startup that when you're at a startup, everyone knows everything all the time. But when you're a big company, you have different management and executive leadership needs. So Jeff came in, he wrote all that stuff down, and it's still the way we run the company today. We're 8,500 employees now. We basically doubled size year over year over year from 2009 to 2014. Okay. Something else that happened here. As those of you who've worked in which lasts a long time know when you work on a code base for more than six years, it becomes full of gunk. Okay. We had tremendous technical changes we needed to make to make sure that we had the technical platform necessary to make the things. Things successful. So we had to change our technology strategy at this point. We had to think about basically building for scale, for flexibility, for developer productivity. A whole bunch of things we'd never considered before, because we now had hundreds of developers working on stuff and still had to drive to be able to move quickly. Finally, we had to change our financing strategy at this point. So we had been doing financing. Basically, we became profitable in 2006, but now we were thinking about, how do you bring together the capital that you need in order to be able to do things like acquisitions? So not only did we go out for a C round at this time, but we also did the IPO in 2011 in order to be able to make sure that we were ready to make necessary acquisitions along the way next. So this is a small group of people. This is in our new San Francisco office. When we've crossed the 300 million, you can see 300 million is back there. We crossed the 300 million mark. This was one of the major changes we saw. Our development organization is now split across many geographies. For the first time in the company's history, we now have as many employees working outside the United States as we do inside the United States. We are in 27 different countries. We have major operations in China. We have people spread all around the world making LinkedIn happen. We also have 8,500 employees, more than $2 billion of revenue and so forth. So again, the set of requirements is actually.

So this is the, this is the.

Kind of thing that we're talking about. This is the LinkedIn story. And we'll have lots more detail as people desire it and as you want to add later on, because this is a very, very high level description. But there's no clean path which gets you from one thing to the next. But knowing these changes and how those needs change over time is the main thing we want to get out of this. So we can talk specifically about some of those things. And we're going to be doing it with every guest who comes in and talks about the step stage they're actually at.

And the point is not to make this the LinkedIn story, obviously. The point is to give you an illustration of one example of how these companies actually change and what are the things you need to succeed at in order to succeed in building an interesting company.

Any questions so far? Any questions now? All right, so 20 more minutes and then we're good. So just quickly. The next two weeks are about the family stage. It's about having a team, small team, trying to find product market fit. And so the things you care about are mostly these. Is your product any good? Does anybody care that your product's good? What do you do every day? What's that?

Other than you?

Yeah, and your mom. And your mom and your dad. They love your product, of course. Who do you hire and how the hell do you get them to work for you when they can go work for Facebook or Dropbox or hot startups X or go to Y Combinator and be their own founder? How do you get anybody, not just customers, to care? How do you get any employees to care? And then how do you make sure you can pay people anything you want to add here? This is it. This is about all you can care about at this stage. Things that are not very relevant, they're kind of key, like who's in charge and how do you have analytics? How do you tell you're doing a strategy. But in truth, you're not going to do any of this stuff because it's not nearly as important as these other things. Product, product, product, people, people, people making sure you can pay. That's it. There's nothing else at this stage.

One of the key things when you're looking at these different scales is not only which problems do you solve, but which problems do you not solve. Part of the entrepreneurial journey and that happens even when you're at scales of thousands is there are fires burning when you're going home. That's fine. You have to know which fires it's okay to go home. Like, yeah, we can deal with that one next week. That's fine. And which ones you can't in the family os one. These are some of the things that are absolutely critical. And if you're not obsessed about them every single day, you are most likely going to fail.

Yeah. I mean, I would say Reid is probably better than anybody that I know, which is a guy called triaging, which is like knowing what to take care of and what to ignore. And when Reid ignores something, he totally ignores it. So there are things if you. I mean, he has this characteristic some of my other partners do, which is if you send them mail and they give a damn about the mail, they'll respond in about 18 seconds. If they don't and they don't respond in 18 seconds, you are. Forget it. You're never going to get a response back because it's below the triage line. So I think that the key for this stage is know what's important. And the stuff. I tend to be worse at it than read. I tend to say, oh, my God, here's my to do list. I'd really like to finish these other things that are maybe not totally priority, but like, they're unchecked. And I'd really like to check that box. So it's very. A little bit Stanfordy in that way. The But Reid is pretty good at letting fires burn. And letting fires burn is pretty key if they're the right fires.

Yeah. Letting the wrong fires burn, obviously, is another fatality.

Pretty bad.

Yes.

Another fatality. Yeah.

Actually go back to the other one. So there's a lot of things that all. And there's a ton that fits in the fore everything else. There's a lot of things that go into building a company. You do not pre solve problems. So for example, it's very rare in the family stage that actually, in fact your data is going to be key to your success. It's very likely that as you get to the village, maybe even the tribe, the data is going to be essential. So it shifts here. Who cares? I have a basic dashboard. How many people signed up, how many people downloaded the app, whatever. Fine, fine. Or understand your exact thing as you're beginning to get into it, that will move from 10th to second or something, and it depends on the exact company and what you're doing. Likewise, you're going to iterate through. Strategy is always important, but the fact is, if you're only thinking and talking about your strategy, that's actually not going to play out. You need to actually have a disposition to getting in the fight, to doing things. That's part of the if you're not embarrassed by your first product release, you release too late. Do not like. There are very few product geniuses who just think it and then launch it, and it works. Very, very few. So if you presume you're one of them, it's a high beta strategy, maybe it'll work, probably won't.

Part of what happens is trying to get anybody to use it is a pretty herculean effort. Trying to get the thing to compile and then ship and then release it in the App Store and get anyone to use it, you have to do hand to hand combat in a lot of ways. Once you do that, if it starts to work at all, the system, the app, the people and all the users become too big for you to hold in your head. And that's why data starts to become more and more important over time.

One great thing that's changed a lot in the last few years is y' all are in a much better environment to be able to handle this. And the reason that's true is that so many of the things which are in fact not vital are now things you can get off the shelf. Like for instance, the whole idea of like provisioning a colo is something that we had to do. We literally, in our first office, we were sitting on the box instead of chairs, we had boxes of hardware that we were going to take to our colo. Okay, that no longer happens. Now that problem, which is not an important problem at all, it's a necessary thing, but it's not important, is something you can do just by signing up for Amazon Web Services. So you've got it much better. The good thing is all the things you don't want to focus on, many of you don't have to. The thing is that the things you do have to focus on are still really hard.

Yeah. The bad news is everybody else gets to do that, too.

Yes, exactly.

So you're competing with everybody who has the same thing. So this is my favorite essay about OS1 by Paul Graham, who started Y Combinator. It says his essay is do things that don't scale. And I think you can convince yourself. And so this will be homework for Thursday's class. There will be three things to read, two things by Sam Altman, one by Paul Graham. But this is the essay that I think everybody should pay real attention to. And what he tells is stories about when you're just starting out, you might have to go grab somebody's phone and install the app for them and then show them how to use it. That obviously won't scale to even 100 users or 1,000 users. But getting the first user is critical. Getting the second user is critical. And so he thought it was a story about Airbnb doing things that didn't scale when they started. And I don't know if you know, you know any of those stories.

I know a lot of the stories.

Do you want to tell any of the Airbnb?

Well, so, I mean, so for example, one thing is they went door to door in New York to sign up people's. They identify them off Craigslist. They got in touch with them, and they went and said, you should go post on Airbnb. So the founder showed up and said, hey, this is why you should be listing on my marketplace. They then also began to realize that the trust and quality of the transactions early had a lot to do with, do I see a place that I like? So they would pay photographers to go take pictures of those places. Right. Those are all kinds of things that the founders were doing at the very beginning. And when you're doing that, you're not writing code, you're not buying marketing, you're not interviewing and hiring people. That's all a bunch of stuff that is actually, in fact, massively time intensive. Now, of course, when you're in the family stage, you will tend to be working probably casually, 100 hours, 120 hours a week, maybe even more. So that's fine. But it's a choice of how you're putting the time. And those are all things that was necessary to get to the initial critical mass to have a value proposition that people say, oh, yeah, this is actually something I would use.

It's critical for so many reasons. It gives you a sense of what actual customers look like and feel like and what they care about. It. Does modeling for all the employees. Does modeling for your customers. It helps everything, like doing things that don't scale. Like, maybe you will do it later, maybe you won't. Craig Newmark did customer service the whole time he was at Craigslist.

I think his title is still Chief Customer Service Rep. Yeah.

So some people like doing that forever, but it's critical at the beginning. So we'll have you read that. This is Mozilla, and this is my story. I got there sort of right when the orange started to. Obviously highly correlated with winning.

Taking personal responsibility.

Totally causal. No. So all I wanted to say is, look, this story is you're going to see it again and again, which is people kind of off to the left kind of wandering around trying to make a thing that they think is important. And then you start to get a little bit of traction. Some people care. And then you start to figure a thing out. In this case, they figured out how to build a quick, fast web browser right at the right time, when IE Internet Explorer, none of you probably use anymore, really started to not be very good. And so they were building asset, building asset, building asset. And then the context happened that they could blitzscale. And I was employed 12 or 15 right at the beginning there, but it was right at the beginning of us blitzscaling. And we got to be about 400 million users over the next three or four years. But anyways. But we're going to see chart after chart that looks like this, which is slow, slow, slow, fast.

Actually, go back for just a second because this is the thing to actually really pay attention to. This isn't just a compounding graph. There's organization, uncertainty, the fog of what's going on in the market, all the rest that goes into this. And that's part of what you meant by decisioning on when are you trying to hit the accelerator?

Yeah. Yep. Yeah. If they had tried to hit the accelerator any other time, it just wouldn't have worked. They would have spent money and wouldn't have happened. Hitting the accelerator then was a profoundly uncomfortable thing. And one of the things is when you're starting to blitzscale, it's uncomfortable all the time. You're not doing anything. Well, except just trying to keep the wheels or the wings on the plane, I guess, is the metaphor I'd use. But all these charts look the same. Here's Airbnb. Airbnb had a long period over here on the left of the graph before 2010 that was just flat. And again, they were building assets, they were creating momentum, creating community, so that by 2011, when conditions started to get right, it started to work really well. So here's the first couple of weeks. So nine 22s today. Welcome Thursday. We'll have Sam Altman come in and do a reprise of his class from last year. One of the assignments we'll have to do next day or so is in the LinkedIn group, which we'll tell you how to do. Put down questions you'd like us to ask Sam during class. It'll be an hour and a half of Sam talk. Sam, he was here at Stanford. He had dropped out of Stanford, found it looped. Now he runs Y Combinator, probably the most important startup organization in the world. This is no joke. He sees thousands and thousands of new ventures. He helps actively hundreds. There's nobody quite in the same position as Sam. And so what we're going to ask him to do is of all the things he sees, especially at this organizational stage, one, what does he see around commonalities?

Patterns that work, patterns that fail.

Yep. So Sam, we're grateful that he's going to come out. So that's the content for today. We have two more slides. Here's how the class is going to work. I'll come back to it, and then here's what to read for next week. Does anybody have any questions before we talk about mechanics and sort of class logistics? It seems kind of a test advised to consumer Internet.

Do you think B2B is going to be equally relevant here?

Yeah, we'll talk about enterprise software. We call IT enterprise software.

B2B.

Today you got a lot of consumer Internet. Reid and I both, Reed Allen, we all. Well, LinkedIn I think is a good canonical company, one that lives in both worlds of consumer and enterprise. We do a lot of that. I think it'll depend on the guests, especially when they come.

You should mention reactivity too.

Yeah, I had an. Well, it's kind of a long story, but I did an enterprise software company. We sold a Cisco too. So we'll talk about. I mean plus Dropbox and Quip and some others.

The goal is to be appropriate, although we will. We know consumer better and it tends to get bigger. So they're probably disproportionate time on consumer. But we will cover B2B as well.

Yeah. And in fact, we also have one biotech guest as well who's coming later in the LUCA mention. Yeah. Yeah. So Elizabeth Holmes, who is the founder and CEO of Theranos is going to come, which we're pretty excited about. She doesn't talk a lot in public, so that should be an interesting one too. And it's quite different domain.

So the question is, are these blitzscaling strategies equally applicable when you get out of the software realm? There's essentially three parts to the answer to that. The first part is it's all about speed differential. So the question is, is moving faster than your competition is still important? The pure blitz scale part of this is actually in fact a differential speed between what's going on in the markets, what the competition looks like and how you play. And so it still plays on hardware. Second thing is many hardware, or call them atoms, businesses and industries are being more affected by bits. So there's software in medicine, there's software in genetics, there's software in hardware delivery, where the software is the key part of the differential. And so there's more ways that software affects these other industries. So that also just picks up the entire competitive clock of that industry. So, for example, what makes Tesla interesting is not so much that it's an electric car, it's a software car. That's actually, in fact the thing that makes it interesting and that starts what's really picking it up. And then the third part of it is that you, there are some things that will be different. So for example, in hardware or things like it or medicine or other things, you have to have a much, much lower error rate. But that's still something you say, okay, how do we move fast? A little faster than the competition with a low error rate, as opposed to, we can just accept a high error rate as a way of doing it. Because one of the things you'll see frequently in software is you'll accept a higher error rate. Like, for example, you'll accept customer service that essentially responds to email. Like, take the PayPal case three weeks later. Right. As opposed. And they don't do that anymore. But that was during the growth period as a way of hacking which problems you need to solve in order to scale. Now, in kind of classic, whether it's biology or hardware or everything else, you actually have to have a much lower, lower, you know, much lower error rate. But that still can play into it.

You'll get judged on what are called comps, comparables. And so people will, to the extent that you don't have competition, that's direct. People will try to baseline how your progress is going against others. But I think critical questions are, are you selling your product and are you hiring well enough Not a lot more complicated.

The other key thing of this is you actually do not overly focus on your competition anyway. The real thing that smart founders, smart executives, smart investors are doing is saying, will you own the market opportunity? Right? Are you moving fast enough in order to do that? Are you building out the foundation such that it's durable? The key question on competition is if someone else owns that market opportunity before you, then you're clearly not going to own it. So when you get to the competition is not close to you, what you're actually beginning to think about is, okay, how are you building something that will compound over time? Not, do you get there really fast and is that strong? Now, of course, one metric is if you're moving very slowly, the fact that you're going to compound and get big later becomes a little bit in doubt, not necessarily fully in doubt. So those are all the things. And this is part of the reason why it's not pure science. There's a lot of judgment that goes in each specific. And part of the reason you can't just give out a roadmap is because, actually, in fact, part of what you're doing as a founder, as an executive, is you're exercising judgment. Part of the reason. One of the things we have here in Silicon Valley is essentially a network of learning. So one of the things you should always do is talk to all the smart people around you, not just people who have done it before, but also other smart people, because if that makes your decision crisper, then you make that decision much better. How fast should be moving, how much capital should be? Should we make the hire early? Should we make the hire late? Those kinds of questions are the things that you're hitting as you're going into scale.

And an example for that from the LinkedIn story. We didn't pay attention to the competition, particularly at all early in the period. The reason was that we were concentrating on was the thing which was going to allow us to completely win the market down the line. So if we were able to build up the largest collection of professionals together in one place, it actually kind of didn't matter if we got that first. Even if we didn't have the business set up yet, the people who are already concentrating on monetizing, it was going to be fine. So basically we were concentrating on that stuff and allowed us to not take our eye off that ball and continue to be successful. So that is exactly what they're looking for. What people are looking for is, are you building something which will have the asset necessary for you to dominate the market down the line.

Most of our early competitors at LinkedIn are companies that don't exist anymore and they were all focused on selling to corporations.

Okay, so we're going to just quickly about mechanics of the class. So we're going to use LinkedIn groups, we're going to use Medium collections, and we're going to have some assignments and readings. So the way it's going to work is we're going to send everybody an invitation to the LinkedIn group. That's where we'll post questions and thought things, have discussions, and we'll ask you each to post questions for Sam Altman or answer some questions about the content of the week or something like that. Additionally, we'd like people, it's optional, but very, very recommended to put some of the work that you do in class on medium. And the reason we'd like to do that, number one, is I think everything gets better with visibility and interaction and being on the public. And some of Blake Masher's work on Peter Thiel's class two years ago, I think is very, very indicative of this, is if you do good work, if you write good things, lots of good things accrue. And so the idea is that for work, if you're opt in on medium, we'll look at your assignments, we'll post them all to the collections, they'll all be visible to the public. But then we'll also curate some of the best work and amplify that work through LinkedIn and Twitter and Facebook and what have you. So I think it'll get you more attention when you've done good work. And that's, I think, a good virtuous cycle. So that's the rough way we're going to work. And we'll have more explicit instructions in the LinkedIn group itself. So these are the three things we'd like you to read for next week. This will be in the LinkedIn group. One essay by Paul Graham I mentioned, do things that don't scale. Startup Advice briefly by Sam Altman, which is all of his advice condensed into one fantastic blog post. And then why Silicon Valley Works. That's all we have today. And it is one minute to go. 40 seconds to go. All right, so I think that's it. So thanks for the first day. We'll see you soon. Thank you.