Startup insights from Tobi Lutke, Jason Fried, Elad Gil, Sam Altman, and Palmer Luckey

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Going forward, we’ll send a daily insight Monday through Friday. And on Sundays, we’ll send out 1 free insight + 4 new bonus insights for premium subscribers (upgrade to Premium for $5/mo here).

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Today’s insights:

1. Tobi Lutke explains what the VCs who passed on Shopify got wrong

2. Basecamp founder Jason Fried: “You have to do the job first before you hire someone to do it.”

3. Elad Gil: “Too many founders raise money when they shouldn’t”

4. Sam Altman on building a huge company: “At some point, people have to spontaneously tell their friends”

5. Palmer Luckey explains how he got the idea for Anduril and the two other companies he almost started

Tobi Lutke explains what the VCs who passed on Shopify got wrong

Tobi recounts pitching Shopify to VCs on Sand Hill Road a few years after founding Shopify.

Investors passed because they thought the addressable market was too small. At the time, there were about 40,000-50,000 online stores, and even if Shopify captured 50% of the market, that still wouldn’t be a venture-scale business.

When Tobi ran into the VC partner a few years ago, the partner asked Tobi what he missed (Shopify is valued at almost $100 billion today).

Tobi explained:

“You were actually correct, but what you didn’t realize was that Shopify was the solution to the very problem you identified. The reason there was only 40,000 online stores was because it was hard, expensive, and everyone who tried ran into all these brick walls of complexity, which Shopify, one after another, smoothed over and made simple to do.”

Tobi believes this is a common mistake:

“What a lot of free-market thinkers don’t understand is that between the demand and eventual supply lies friction. And I actually think that friction is probably the most potent force for shaping the planet that people just generally do not acknowledge… That was my theory when I turned my snowboard store into Shopify: there was a lot more people like me except there was too much friction which we needed to solve. And Shopify has proven out that every time we make the process simpler, there’s more consumption. At this point, we have a million merchants on Shopify, which is a mind-blowing number. So friction is a major component, and it’s something that software is uniquely good at reducing.”

Full video: Dan Martell “Tobi Lutke The Creator of Shopify”

Basecamp founder Jason Fried: “You have to do the job first before you hire someone to do it.”

Jason recounts the problems he ran into trying to hire someone to run business development at Basecamp:

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