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I cut
some of the vigorous questions
earlier, which I think are good night.
Given that we have an audience that will go for questions
to make my remarks will sure I was planning
to leave enough room because
you know answering the questions of the most interesting to you guys
is probably the
this one more interesting whatever marks. I have
one of the ways I look at start-ups is
the set of hypotheses
that must be true.
In order for
your company, your idea
to potentially be a large
kind of change in
the world and frequently the way that look at my investments
are things are networks platforms
marketplaces because those are things
that can affect 10s of millions of people
and create an ecosystem, how people come
together. One is a real like but the consumer Internet
but one of the things about that framework about
looking at it as a question of which are the hypotheses
that if you are right about
you have an interesting product is is
not quite just that simple. So frequently what
happens people so I have this idea and if
everyone were already using it right
it would be you you be great everyone
will use this you know whether it's
insist on whether it's a subtle the
say that kind of thing.
10s of millions. People are using it
and I have a unique concept: everyone using a B grade
it she it. The reason is not that
easy is because you have to move from zero to
that number, right. And frequently, people
think of of of a partisan
once everyone's adopted has adopted
it'll be very valuable. That's
actually the, the really key thing is actually think
through how it is, you can actually get
to that stage and one of the metaphors.
I think about what I do this they actually
picked this up and adapt this from my friend of mine,
but it's kind of a, do you have a beachhead,
we have the Marines landing on the beach in heavy
army were invading the market establishment you have
nation building, which is what happens when you've establish
yourselves attends the hundreds of millions of users
and your your your your solidifying
her mark inflation network of platform
and the real challenge
is not to to not ignore the challenges
of getting on the beach, because one of the
things that's really central is there
all kinds of consequences, about the fact that it's much
cheaper to start for example consumer Internet companies.
These days, what it means is there are
hundreds and thousands of more being started
and your average person has
in their mind that number websites go to you
is something like 7 plus or minus 2
with to being a safe that
wrote. So in order for your
thing to get up there, you actually have to get into
a nuff distribution enough
engagement to
cause that to really start ramping into
our own public clashes and breaking
through all the noise. And so part
of the hypotheses about
you know about, but
what has to be white and Orissa my effort to be
tipped to be the right one has to be,
how do I get there as well. Like how I first
on the beach and how then expanded
massively because
if you don't then basically
it'll always be pretty small. And
you know one of the things that's one of the reasons
why, for example, out of a lot of me especially
Commerce them and of other efforts end up being
a seal efforts is because
surge is one of the things that people remember
out of the 7 plus or minus. And is it can
actually be a part of the way that you think
fundamentally registration strategy because
if they're not actually thinking about your thing, but you have actually
good way that they discovered when they come to something else,
which can be searched or could be,
you know, for example, another pattern. Up to now.
This pattern is that reality. We'll talk about a lot, happy to chat
about it. Good questions. Another pattern is
becoming part of the existing communities
of example pay basically
intensely launched are on you day
there's also of course you
you know that you have have grew on
MySpace you know singer on Facebook.
There's a set of these patterns
that you have to do in order
to get one Sizemore be relevant
and part of your car list
of hypotheses has to be,
you know, how is it that I get there, how is
it that I get out the gate and I and start this thing
really, really growing and moved through that phase
now one of the
things that I find that people frequently
underestimate this competition. Structurally,
the reason why the unrest and their own strategy
and thinking is because you know we're all World
Water ourselves, we think we're smart with an idea that
other people don't have right you know where
we, you know we're kind of bound with and
yet we can we can beat the competition just like sporting
game something else. The challenge
of competition is that,
is the competition is even just mediocre we
go, it can slow your whole process
down, will be competing with you for users of computing
who were finance for hiring employees
you know for market share
of the press and if there's a whole group
of people competing with you getting above the noise.
It's much harder now doesn't mean the competition,
it doesn't mean the competition
is terrible might mean for example one
lessons we learned a PayPal was well if
you have have competition make sure competition rules sucks
banks such as competition against
Internet companies. It's
part of what comes about from having the
regulatory structure and one of the things that
was kind of I don't know how many of you have been
the commoner stories one now.
But one of the things that was kind of
interesting, as initially said. Okay, well, we'll go get a banking
license, India will be part of a business model
source. So you know we went
all the regulators who contacted us we called.
No, you know,
you know, like, I know it's fine applying for a banking license European
to worry. And then we start
looking at what it was like to be, to be regulated. We
set essentially what it means is
you have to give a new product that you are a lot of
the regulators and wait for a year for
them to make a judgment but whether you want to.
Boy that would tell us we need that.
But, so we all what's good
because that's what the banking competition has to do
that, then I had to go back to
the regulators and settled by the way, we know we
told you was okay that we weren't going to be a bank. This
is that was okay with
that, that we will get we apply for bank
license back, so we don't think banking regulation any longer applies.
And
you know what we would still be over here your money transmitter and
that's fine now deeper story behind that
would have been happy to go into,
but part of the
question for you guys in terms of being
perspective founders is to think
seriously about what your competition looks
like because
you know part of it is not just oh there's one
person is stronger than you. It's not a question of what happens
of Google build your exact thing. Usually
they don't usually Microsoft, doesn't
it. If there's a whole zone of people
are all competing and I'll be good example
from my personal history which
is one reason I know this practice.
My very first companies company called social
and which
I on the domain
and you know basically that the
the key that the beachhead strategy was to focus
on being a dating service like match that harmony
that's for thing and it was like,
okay. We know there's a demand we know 10s of million people using
it be really good I had idea of
what I still think is the best matching
algorithm for matching interest between 2 people
and we've got the whole thing launched and
we kind of journalist moved along
at a gradual place because or so many people trying
not to cry that space and it was very difficult
to get above the noise even
if you have a better product
so big. The question comes
down to is not to think about it, just as a
question of, oh, I have a better product and
with a better product could break you
know my thing will work most other things because
and leisure products that 100 ex better
usually your average consumer doesn't really but they they
they they use what they encounter
could pay and if there's other things
are much more successful distribution and they have a much better viral
spread much better index. And as you know,
and then a thing doesn't matter to products
tax better the the the the the the
the Folkestone intolerant. So
again back to the question of hypotheses.
Now one of the
things that is set a lot, but
I think it's worth emphasizing is what
is this dictum about filling fast.
None of us get in and start a business and more to fail,
but that's not what we're, that's not
we're aiming to do. But the
big the question. Ask yourself very serious
that when you're looking at business is what
one of the hardest hypotheses
that I can start getting data on right
away right that I can start
seeing that does this
thing work. And I'll give an
example of the very early
stages of went in so
icing I'll give examples it'll
be 2 things. Also, one other part of it, which is
one of the reasons why tell entrepreneurs
to set their internal expectations of a, the first
product launch is if not embarrassed by
your first product release of released
too late. It's the emphasis of time
but it's getting out
and getting a market and learning and moving is much,
much more important than the Eagles satisfaction
of all I wanna do it completely behind
a you know a cloak and then reveal the cloak everyone
knows how wonderful, what do you say, and they think
the products so wonderful that's
actually rarely the winning
strategy dash wouldn't charges is and moving
and getting up there and the data a fast
rate, so an early stage in the
in the early days of went and
my team that you know in a room, a look we
can't launch we need delay,
we have this feature that we want to build
coal finder which is where you advertise
your network. So what is the,
you know, one of the, you know,
people are looking for. Whether it's you know a lawyer
or a not
there were contacted a company
as rugged viral. You
know that request my network
and if we're not that we don't have that feature
when we watch, then
I know what it is and so we have the
delay launch was like, well, is there any reason we
can't build that the draft will launch and said no, it's okay.
Watch the fact is that
if you guys turned out to be right that turns out to be the central
problem work on work on that problem right away,
you know, here we are at. 7 years later, we've not large
contracts finder, yet it is it is
still us back right now, we have
heard you know and we we presume we will get to at
some point, right.
But what we discovered was
the mechanism that we
were planning on using to grow viral
acres of the time in 2003
the work as many people trying to get you this sign
send email invitations. So we just figured
an email invitation thing would be sufficient. It
wasn't and like, okay, how do we solve that
problem, and that's the problem that we absolutely this
all and what we did was
we said, okay, I said as an okay what is when
someone has just 3 when some encounters
Lincoln what's the first question. They have in mind
it's balls or anyone else here, I know. All right.
We built the wheel of restrictive we did this
is okay the upload your address book in
order to see who else you know who's here
right is that's a question at least some percentage
of people are interested in. Do
that and then after they know some people you can sense of
them he would you like mothers
and that is the way and that basically changed the inflection
point for the growth in mind
10 which is one of the reasons why
company is doing well, that and
getting to those a tackling those
early hypotheses as soon as you
can, is extremely important,
because there's a tendency
to to say well kill let really work really long
of the thing that's going to be hard to solve.
But the problem is time is extremely important and you wanna start
running right away because if you
say for example you learn that you can't solve a
problem like one of the the key challenges
that one of the things that's probably the most difficult
piece of advice and travelers are frequently given
is when 2 when the change.
So you know I brief
interlude here, one of the funny things as 2 pieces
of advice to the absolute saying level
of certainty by people giving you advice.
What is going
on with vision be persistent against adversity
go forward all want what Bill,
the other one is be flexible listen to what
the market tells you right.
Well you know when you when you when you when you get
customer data other kinds of things change
and the truth of the matter is, that's
actually part of where the skill comes in how you learn
to do what what an as well,
which is making that judgment call on
it is tightened persistent and when it's time to change
and when it's time we go. Okay. Could
this this path
is now fairly unlikely
work you never get zero who pay or
very rarely it's extremely it's rare gift
if you actually figure out the past one simply doesn't
work what frequently is is all I need to
do more and do more it's not working. When
you get to that judgment on when the and pivot
is extremely important now
early stage of of PayPal is actually,
you know very close so
Peter Max Timlin
said: we have this really great business
we'd love you, do
you know come join our help us with this
it was encryption or mobile phones.
I was that while you guys are killer love
to work with you encryption on mobile phones
a terrible idea. You know several going where
the but I'll join you deserve your greatness
and why do you think this is, this is terrible.
And the answer is welcomes this party can do into thinking.
The you know the only
way encryption platforms and be adopted as a someone
else build an application that depends on your,
on your encryption platform
and that's the way it's gonna get to sufficiently broad
adoption. So if you actually presume that there's a
10% chance the start of a successful now
you depend on someone else. You don't even know and say they're there
and you're there, you're not one percent. That's a bad place
to be and said okay well have. And if we do you
mobile phones as I go right. Well,
how long has that take you to build 2 years
too long. What, what 6 months
appealing new Palm Pilots okay Palm Pilots problem
was it on the use case was when spoke
to dinner have the right at a nearby restaurant
problem of course is how many people
have hope and you no nor of how it's now got
back in the day.
Even then, this is called central you you
know you've got every restaurant between zero one table
all have pulled out, and that's when black sludge
in what oh, you know what I can sink
3 now like, oh, that's a good idea. The
fact that even with PayPal had
probably the best discipline I've ever
seen a company for pending even
with all of the pivot. So we did they still
of launching the product because that
Oregon for halfway down that road
and you you you literally and all the way to
the point where we literally
launch the product had the product is in the front page of
and we closed it down. He is-was too much friction
against what we were really trying
do which was build payments
and first very close to the
the market now you because the market and being
very contested concede they had this thing called Bill
point which was, you know the way
of earlier affirmation competition
cause they really kind of locked in war
and figure out how to win that that one marketplace
now to give you a sense of how
important kind of competition is.
Keep was
the creator of revenue per share
in the first quarter after the acquisition made it.
The only thing that they really did
was they stopped trying to get everyone stopped
using us and they started saying,
yeah it's okay to use PayPal and
the volume went up by 40% in one quarter,
right. So now that
was a place where they own the market place, but the question
of your door or structural
and keep these things round competition that you have
to think through, how do you break through, how
do you make that work as as something
very central so
and so when you
think about these hypotheses and you think about which of them,
but what I acting courage and to was
list them that she think through what does the world
need to be like for my thing work
and also for me to be able to build to
the mature place what my company to be
and which of these hypotheses buyer
or are tricky and which of them can I test early
and test won't give you a binary result
will be yes works. No it doesn't. But all give
evidence in order to inform her judgment and so
that's a signal. They look
at this stuff, so I think I'll say a
few more comments on on
kind of things on the
entrepreneurship side and then
open to question, so.
One of the things we're looking at a very
early
when you're looking at the company early. The
key thing is to build as
much of a network around you. As you can.
Very few of these
XL can Valley go, is
that we actually spread, a lot
of how to intelligence about
like for example, what should the development cycle
apply. How do you, how
do you do decision on line,
one of things that's
now got now that in end the common
parlance, who was one of things I was very early on in my
angel investments thing. Think about all these things is
game dynamics all manner of once you're
doing that narrow trading ideas something in her view
that see one of the old as much
intelligence in your network around 2 companies
you can and whether that's from
co-founders higher as investors
advisers. The whole thing
out and and we what
was saying about company buildings exactly
right, you want to build you up as much
assistance and intelligence
around can now
part of that plays into is, you know, I've
been asked before, why have my
great idea of a dozen people have it. How many people so
I tell it to. And
the answer is, we'll don't publish it and tell your
that your product launch like don't
publish it to the web because you don't get any
intelligence back so that that doesn't help you
but frankly anyone that you think is possibly
smart they can possibly give you more insight
in how to do what you're doing better, and that he built talking
talk to them because
every piece of intelligence. You have an ordered
the tester hypotheses and and this
is part of things the fail. All we need is
more work may be a need to adjust is extremely
important in getting in the race because
part of the consequence of
it being much easier to start a consumer company
lower dollars faster do is
is a lot more people doing that there's a lot of other
people running at it and you know one of
the talks in a couple years back at Cambridge University
basically was like look
the, you know, why is it that Sultan Daly has
so many consumer and Giants
given that directly consumer
it's global you you know you know kind
of service anywhere that he many words don't work
and the reason is, if you want to know how fast
it should be moving look around the room
right see how fast other people of
it and one of the benefits we have here in Silicon
Valley and you don't have, and you know. Cambridge, England
or a large number of the places is they
don't see how fast it we're innovating how much
the thing that's how you know how much the China jump
ahead in order to do stuff and that's
that's both
you know frightening
right but also compelling and something a
resource. You can learn from, in order to be here.
So with that, that's kind of some
opening remarks to try to get to potential
questions and I guess I'll pick up the questions
I'm.
So the question is what
gets me most excited the vision fluent in one's
years down the road. Key
thing I think in the
founding idea was that the whole nature work is changing
and every individual is essential in our small business and
all the things the plight of business apply to an individual.
Some of those things like brand,
but also the things that we're talking about here and from
the business strategy come down to
how an individual navigates their own work
life even on a daily and weekly
basis selectors how you get the business intelligence
and or to be a more effective professional what
should you know about how do your job better
how the information proper professional solve
problems. How do you get an inspiration assault rubble.
Well, we've been working on the last couple years as
a whole set of tools and platforms in order
to enable professionals that way. And now,
hopefully, we're getting the testing the right hypotheses
over the next year and that's the, that's the thing I'm
most most.
So the question is how far what
how far ahead you plan especially given
preventing and testing hypotheses. Well,
it depends a little bit on the industry
I a specialized in consumer Internet and so
generally speaking, I I I cannot have a
chuckle. If anyone's ever planning more than 6 months in advance,
and when people ask me, you know, what
is your look like in 5 years whatever,
but who knows.
Now, when you're doing
different
industries move a different clock speeds rights of
you doing hardware semiconductors of pounds
or things those
you have to have a much higher degree of certainty in terms what you're doing
and you have have much longer planning cycles
right. But generally speaking on the consumer Internet site
is rethinking further what you should have
an idea, but what we're building towards and what
we could potentially get in year too,
but if you're really focused on something that you
think is I take longer than 3 to 6 months to deploy
and get out there, especially at an early stage,
that's very risky betting the company
by itself.
Well,
the car so address
book was very important or the only other factors,
well one of factors, part of a reason why
did it take a year off. After I left PayPal
just by regional plan
was at the time there was a lot less
happening on the consumer. I thought was a perfect time to start
a conservative company still lack of competition was
actually valuable thing that was actually
but he decisive then usually what happens in these
things is one thing is really the thing that matters
and you keep hunting that one thing now
a year to later we also realize
that we felt that the
when the you know the phenomena of
Googling people
was growing or you're searching for people. But we
will still the dominant search engine
and we realize
that most people would want their professional credentials
found first if they thought about it and so we,
we launched a whole public profile part
to be against the growing that I was
a year to later it was I think the January
2005
right but the
that was also a valuable growth
part of it because we can, we can look at
how the world was on the other.
Now.
I wear 3 hats.
She heh
heh heh heh heh
heh heh
heh heh heh heh
heh.
Yet so question is
however ecosystem and how to reach
me and generally speaking,
because one of the challenges,
I spent that right so I'm
home I'm embedded and triple
the
the best way to reach reference through somebody
I know I get probably about
30 to 50
emails per day with people
critically on businesses, the right of
people I don't know what I think was
I can't even respond motivated it
acts embarrassing the rude
so to
reference is the right way to, and the way the
involved is
the way I like to operate as I work with
in trouble at 1 is a lot investor
owning and you know that I've been doing
this despite the fact is probably more in
a rational for me in terms of the impact. They can have the world
all were because I like working on this project.
They can get a massive scale and have a
really great impact on human ecosystems
and you know that's why common child
he lives in, and all the rest. So,
a reference is the right way to get me.
Efforts.
So the question
is basically. And if I
and rightly as one of the
one of the right criteria in terms of hiring people
early and I think that you were partially
answering question whether I would answer that if I
haven't done this right repeat
one of the things I find is very important,
especially consumer items the early crew is
a high clocks speed learning cycle
hiring for perfect expertise,
they need to have a base of expertise like hiring some
of about and cylinder code
more notice
it right,
but on the other hand, what's more central
is is most
interesting start-ups are covering new ground,
whether it's even, and how the product is
the distribution mechanism for the product
frequently even
certain parts of the architecture and so you
want a true that that
debt. Who here is the group and learns
and acts quickly and so it's that
a part of efforts have what I've learned from my own for start-ups
social at which I PayPal with words.
You know what we interviewed people was from
wrong intelligence, learning
and team sports and
a clock speed as opposed
to. Oh, did you have 10 years running an operational server
for example and
then right behind you. That's question.
But largely for weeks
on viral marketing, but there's nothing
like the same. The minutes.
Think of it, if you want to go. The math
and science matter and interest in the math. The look
of epidemiology.
The question is
what makes the platform promising so.
A platform, the whole
towns of platforms there is how do you get
them actually adopted right.
How does it actually get to a broad enough.
It is the problem. The very first prom of PayPal is
oh. We're gonna have you know encryption on on
mobile phones, albeit platform out
so some people
for example you know one of the sessions have
Marc Andreessen frequently, as he does, he's had to focus
not by forming a lucky if you get adopted or not
I tend to feel that if you actually build
a platform along with you know something that
is already counted nor killer app
you can build up the platform behind it,
you know, to some degree. I think of it like feasible
photo sharing on Facebook is that's where
thing and then you have this platform behind it.
That you know allows companies like seeing for.
True.
With that, the question is, are there any
spaces for online after
Facebook went in November to bring
a Twitter. The short answer is
almost certainly, yes. But if I
knew it, I'd probably already be invested
in Prague. The work. One of the things I
think is that the white about working with
and drop
areas and this is part of what I mean by that network intelligence
is that you know the collective set of ideas,
but there are some great ideas in this
audience, and I haven't had to make
that are interesting discover and so
I don't so much. Go to the market with oh here's
my model and here's my theory and I'm looking for something in it
as much as I look for someone that
I found something that no one else is found.
And that's really interesting and so I'm almost certain that their
but I don't know what it's.
So the question as well invest in pre-revenue pre-launch
start-ups and
I look for. So the answer
is yes.
No facts. There were early
by invested in start-ups that had revenue does happen.
Yeah. But 20% actually. So
that
and you know what you look for an early-stage
companies. As you look for
hours some
combination of an
absolute rule in great have been talking
a real team and the consumer and that that
means people who are really good a product and engineering.
That means people who have
an instinct for what is a good product
now frequently by the way in, in terms of
pre-launch is usually
a good product. He was actually already started building south.
So did you get something that's kind of back of the napkin
it usually indicates are not enough product people
as they should be compelled to building something
and then in terms of pre-revenue
actually, you
know, one of the things as this all the hardest problems.
You're the hellhole hypothesis mention
that I was not enough for its
the heart problems. Well you the consumer Internet
revenue is actually not usually the hard
problem, sometimes it's right but usually
it's not usually distribution. This is
one of the reasons why ice you know people so what he first look
for the first question, I use less million users
send question grass cutting its 10
million users. I thought I said asking
of the questions because usually that's the
hard consumer is if you actually look at this room
he's help, they say, for example the start up
ideas that you take the number of people is firmly divided by
3. And that's the number of of of
companies are being launched what that's and that's
too much for any consumer to pay attention to it
right by a huge number
and so it's how to, how do you get
to a massive size and relevance to the
really relevant thing and that's a combination of a great into
power and a really interesting idea.