Lecture 8: How to Start a Startup

Lecture 8: How to Start a Startup
startupclass.samaltman.com

In this lecture, we heard about DoorDash, a successful delivery business that is now expanding to multiple cities.

DoorDash adds value by delivering more efficiently than small businesses can on their own.

An example of a small business that benefits is a Palo Alto Macaroon store. Before DoorDash, the Macaroon store took orders by phone and recorded them by hand in a thick notebook. Then, when there was time, the owner of the Macaroon store would personally deliver orders out of their personal car. No additional cars were ever purchased and no drivers were ever hired.

One key factor is causing DoorDash to succeed where others have failed: mobile phones. The ubiquity of smartphones has enabled DoorDash to hire and coordinate part-time contractors with personal cars. This new development makes the service cheaper than past competitors.

Now, you may be wondering what my point is. Why am I summarizing the pitch we heard from DoorDash?

Because it's all about SCALING!

Let me explain.

+DoorDash is startup. By definition, that means it wants to scale.

+DoorDash is expanding to multiple cities. I.e., it is scaling.

+The businesses it helps are those who otherwise deliver at low volume with a phone and notebook. I.e., in a way that doesn't scale.

+DoorDash has no proprietary technology and is not a monopoly (Peter Thiel disapproves, by the way). DoorDash is competing on one main dimension: cost. And how do they achieve lower cost than a mom & pop macaroon shop? By scaling. Operating at scale is their main competitive advantage.

+And why is DoorDash succeeding now, when past delivery start ups have failed? Because of mobile technology. And what is mobile technology letting them do? Manage a fleet of drivers at scale.

+DoorDash is a software company and software companies are eating the world. Why are software companies eating the world? Because software scales!

DoorDash's words say to "do things that don't scale." But DoorDash's actions say the opposite. Scaling is the key to their business.

(Incidentally, DoorDash gave an example of something that they claim doesn't scale: writing personalized notes to customers after orders. But guess what? That totally scales!)

Can someone explain why so much more emphasis is placed on doing things that don't scale? Doing things that scale seems to be more important to me.

Edit: I don't mean to be harsh. I'm honestly curious and hoping to open up a discussion. The emphasis on not scaling seriously puzzles me. I'm sure you folks have great ideas that I'm missing.

The idea is part you must do whatever it takes to have your first users/clients and keep growing from there (as the guy from Teespring says) and part is that you must first know what to scale.

Sure, startup = growth, no one starts a startup without imagining it will grow a lot. But that is why this advice is particular powerful, because, as PG says for a lot of things on startups, it is counter-intuitive.

So the advice is more about doing things that don't scale until you actually reach product/market fit (which means "Make sure your retention flat lines at the appropriate level.", as said by Alex Schultz in his lecture); you should do things that don't scale.

But, sure, when you focus in big growth and scale, yes, then you start scaling stuff.

PS: I really sound like the ass-kissing student on your class who repeats everything teachers said before to look good. But I really think al of it makes sense.