Marc Andreessen's Guide to Startups

It’s been almost 20 years but much of the advice is still relevant.

This week I re-read it and, along with the link to his original pieces, added my own thoughts for what’s changed since then.

Marc Andreessen’s Guide to Startups

Why to Not Build a Startup

Startups fundamentally give you some unique abilities when you’re successful:

• To be in control of your own destiny

• To create something new

• To have an impact on the world

• To create your ideal culture and team

• Freedom and agency, via money

However, being a founder is not for everyone. This could be a topic for an entire post another time, but for now here are my thoughts on the reasons Marc flags:

Startups are an emotional roller coaster

No one’s day (at least in the business world) can have highs and lows quite like a founder.

Mental resilience is arguably the most valuable trait a founder can have, because most things will go wrong along the way.

Nothing gets done unless you force it to

Founders need to be a force of nature to simply make progress. No one outside your company will care about what you’re doing to anywhere near the degree you do (or at all, in most cases).

99% of what you hear is “no”

The people you want to believe in you, through investment, partnership, employment, or as customers, tell you no over and over again.

You need to balance iterating your approach to try to get a better response while remaining mentally undeterred that you will figure it out.

Hiring is really hard

The more someone would accelerate the trajectory of your startup, the harder it often is to convince them to be a part of it.

And their position is rational, anyone who joins is inherently taking a foolish bet. They could have a higher, more stable salary and more free time and while you can try to convince them with the upside that equity presents, the best employees are the ones who join because they’re passionate enough about building alongside you to overcome the hurdle of irrationality.

You need to make sacrifices

100+ hour weeks happen, especially in the early days.

It’s extremely hard to balance building a startup with having enough time for family time, socializing, staying in shape, and hobbies. You need to pick and choose a couple from that list at the most, or at least hire an assistant via a service like Athena to delegate what you can afford to.

It’s really easy to get off track

Startups get derailed all the time for unexpected reasons.

You’re balancing so much as a founder that just keeping things on course is extremely hard.

How Much Should You Raise

Marc makes this dead simple. In his opinion founders should first raise “enough to get to product-market fit” and then, afterwards, “enough to fully exploit that opportunity.”

He goes on to say that founders should raise “as much as they can without giving away control of the company or being insane” and more in detail.

What to do When VCs Say No

One “no” doesn’t mean anything, but many means there’s something wrong with your offer or how you’re presenting it that you aren’t seeing yet.

Marc mentions three steps to re-asses and retool your offer:

Lay the groundwork to go back later

When investors pass they prefer to keep their options open to invest in you in the future because they know how quickly things can change for a startup. The facts change.

Founders gripe about this but it’s actually in their favor, a funding environment where you actually can change the mind of an investor by sharing updates on your progress is powerful.

So be graceful in defeat, thank them for their time, and ask if you can reach back out in the future as the startup grows.

Look at the macro environment

Don’t blame macro factors on not being able to figure out the puzzle and raise funds, but understanding them does help you get a feel for how investors will approach your deal.

The only advice here is to make sure you’re doing that realistically.

Identify and reduce risks

Marc lists 11 different types of risk that startups face, I won’t address each one individually but suffice to say that part of the founder’s job while fundraising is to understand what investors are seeing as the weaknesses in their offer.

Investors want to back startups that are as de-risked as possible because startups are so inherently risky to invest in.

Being able to think like an investor and see these risks honestly will let you address them or, at worst, have good answers for why they currently exist you can proactively talk about in meetings or your deck.

When you go back to the VCs later you can then “peel the onion,” as Marc says.

His “onion theory of risk” says that investors watch founders peel an onion with their pitch and the goal of the founder is essentially to not make the investor cry while you’re exposing each layer of your business (and yourself) to them.

What to do When You Don’t Know Any VCs

Look, this is a real problem. There’s a reason one of the most common questions I get asked is how to get warm intros to top VCs, it’s hard, and it’s important.

Marc doesn’t hold back in the piece, VCs work mainly on referrals and most only write a few checks per year.

He mentions a few paths:

• If you have the luxury of time, join a unicorn and build a network

• I would add two more:

• Just start building something interesting and talk about it online

• Befriend founders the investors you want have previously invested in and eventually ask for an intro

The Only Thing That Really Matters

According to Marc, the only thing that matters for a startup is reaching product-market fit and the existence of a market is the most important factor in a startup’s success (not team, not product).

When a great team goes after a market that doesn’t emerge, they fail. When a lousy team goes after a market that ends up being huge, the market pulls them forward to win.

Marc goes deep on why this is the case in the face of common objections, and shares a great definition for what product-market fit actually is (and is not):

The Moby Dick Theory of Big Companies

Startups should rarely pursue enterprise-level companies as their initial customers.

The sales cycles are too long, require too many approvals, and can be killed for reasons that are totally out of your control.

Founders should aim to control as much as possible and not let their valuable time get endlessly sucked up hoping a big deal converts. I’ve mentioned this before when I interviewed Jen Abel about founder-led sales more broadly.

Why Your Initial Plan Doesn’t Matter

It’s common knowledge that the future of a startup is nearly impossible to predict (this is why including multi-year financial models in your deck is actually a red flag to some investors).

But Marc makes a good point about why exactly this is:

It’s simply very hard to predict what combination of market and product will take off before you test it.

Founders who obsessively plan out the potential futures their startup could have in spreadsheets and Notion docs are losing time that could be spent talking to people and isolating their painful problems.

Evaluating Early Stage Execs

At some point you’ll need to delegate executive level actions and decisions, but this requires a different mindset than hiring more junior employees.

Putting someone in an exec role means they will eventually lead an entire organization at your company. I’ve seen many startups give out executive-level titles when there are only a few employees in total at the company.

That’s crazy.

So many things change at startups all the time that the chances you can correctly evaluate who will be the right leader for your entire 50+ person engineering org when you only have 2 engineers on the team are exactly zero.

Marc writes a lot about how to hire, manage, promote, and fire execs at startups in the piece but the most broadly useful part is what he says to look for in exec hires:

He also says that you should avoid hiring a “professional CEO” under any circumstances. If your goal is world domination, I agree.