paul graham essay on startups

How Y Combinator Helped 172 Startups Take Off

Want to see how much impact Paul Graham can have a startup? Here are 3 examples from past Mixergy interviews. The first is Alexis Ohanian , who told me that his life changed when he headed to snowy Boston over Spring break so he could hear Graham talk about startups. Graham ended up investing in Alexis’s company through what became the seed funding firm Y Combinator, but the amazing part wasn’t the money. It was that Y Combinator helped him move past a bad business idea that he and his partner spent a year on, and discover a better one, which became Reddit, the social news site that was sold to Conde Nast within 2 years of launching.

Then there’s Kevin Hale who told me that when he interviewed with Y Combinator, he and his co-founders had an idea for an elaborate content management system. During the interview, despite initial resistance, they were convinced to create a form builder instead. The business became Wufoo, the startup that reached profitability within 9 months.

Finally, a few weeks ago, I talked to the founders of AirBnb . When they joined Y Combinator, they had a site that gave travelers an affordable alternative to hotels by matching them with locals who had space in their homes. They had a national presence, but they were constantly struggling for cash. Y Combinator gave them some funding to keep going, but they told me it was Graham’s suggestion that they focus on just one city till they got their product right, which changed everything. Within a few months, they had a better product and they were finally profitable.

How does Graham do it? That’s what I wanted to find out in this interview.

Paul Graham

Paul Graham is a partner at Y Combinator , which gives startups seed funding and mentorship. He’s known for his work on a new Lisp dialect called “Arc,” his essays , and for founding and administering Hacker News . Previously, he co-founded Viaweb, which was sold in 1998 and became Yahoo! Store.

Full Interview Transcript

Andrew :  This interview is sponsored by Wufoo, which makes embeddable forms in surveys that you can add to your website right now. Check out Wufoo.com. It’s also sponsored by Shopify.com, where you can create an online store right now, within five minutes, and have all the features that you need to keep selling online. Check out Shopify.com. And it’s sponsored by Grasshopper, the virtual phone system that entrepreneurs love because it has all the features that they need, and can be managed directly online. Here’s the interview. Hey, everyone, it’s Andrew Warner, founder of Mixergy.com, home of the ambitious upstart. You guys know what we do here. I interview entrepreneurs about how they build their business to find out what the rest of us can learn from their experiences. And, Paul, I’m going to ask you about that smile in a minute because I’d love your feedback on some of the ways that I do my interviews here. Today, I’ve got Paul Graham. He is the co-founder of Y-Combinator, which funds and advises startups. He’s also an author whose essays are devoured by entrepreneurs. He’s a hacker who administers Hacker News, and previously he co-founded Viaweb, which he sold to Yahoo. The smile, by the way, that I was asking you about. A lot of times when I do my interviews, I start them off with “home of the ambitious upstart,” and I look at the person who I respect, who I brought on here to do this interview, and I wonder, does he think it’s ridiculous, or is this a charming, interesting part of the program? What do you think? Paul:   The ambitious upstart part? Andrew:  Yeah. Paul:  Well, what I was thinking when I heard it is, “Oh, good. This is my kind of place.” Andrew:  Oh, good. Paul:  I wasn’t thinking about whether it was a particularly good marketing tagline. Andrew:  Oh, good. Then if you think it’s your kind of place, then it is a good tagline for me. Paul:   Yeah, ambitious and upstart, that’s exactly what I’m looking for. Andrew:  Perfect. As I told you earlier, I’m going to be structuring this as the biography of Y-Combinator and along the way, I’d like to see what you’ve learned as you funded, I think it’s 172 startups, you told me. Paul:   One hundred and seventy-two, yeah. Andrew:  Wow. Well, let’s start off with the essay since that’s how many entrepreneurs get to know you. Why did you start writing about entrepreneurship? Paul:  Well, I write about whatever I’m thinking about. So I just started thinking about entrepreneurship. I think that started because I had to give a talk to the Undergraduate Computer Society at Harvard. In fact, that’s what Y-Combinator grew out of. So I had to give a talk to these undergrads and I thought, “What shall I tell them?” What could I tell? So I thought, “All right. I’ll tell them how to start a startup.” So I gave this talk about how to start a startup and I put it online later as an essay called, “How to Start a Startup.” That Y-Combinator literally grew out of that talk. Andrew:  What happened? How does a talk become a revolution? Paul:  Well, what happened was I was giving them advice, sort of in real time, that they should raise money from angels. The best thing was to raise money from angels who had themselves made their money from doing a startup because then they could give you advice, as well as money. And I noticed all these guys were looking at me sort of expectantly, in fact, sort of like baby birds. I thought, “Jesus, they’re all going to email me their business plans.” So I said, “Not me.” Right? Because I had never done any angel investing at that point and I didn’t want to start. But then I immediately felt guilty. I went to dinner with some of them afterward and I thought, “Even though these guys are just undergrads, I bet a lot of these guys could do it. They could figure it out.” So I thought, “All right, all right. I’ll start angel investing.” So Y-Combinator happened just because I wanted to start angel investing. Originally, Y-Combinator was just going to be like regular angel investing, asynchronous, not this whole batch model. We discovered that later, by accident. Andrew:  Who are the original startups that were so good, were so inspiring, that you said, “I’ve got to back these guys”? Paul:  Well, Reddit, the founders of Reddit were at that talk. They came on a train from Virginia. Andrew:  From Virginia, they told me, that they got over to see you. Paul:  That’s a long train ride. So I was impressed by their determination. That was actually why we funded them because they were so determined that they came on the train all the way from Virginia to hear that talk. Andrew:  What else was it about them? Because I’m sure there are a lot of people now who will come and travel a long way to see you and they don’t have that magic. But I talked to Alexis and he said that you didn’t like his original business idea, but you liked something about him to bring him back. And I asked him what it was that Paul Graham saw in him, and he couldn’t define it. So now that I’ve got you here, what is it about him? Maybe from there we can extrapolate. Paul:  [inaudible 00:04:50] Steve. He and Steve were both smart, and they were determined, and they seemed flexible. They seemed like they really wanted to start a startup. But it’s a little bit misleading to ask what I liked because Jessica, her nickname in Y-Combinator is The Social Radar. I actually have bad judgment of character. I’m not good at judging people. Really, I’m kind of bad at it. I know I’m bad at it. But Jessica, she is very rarely wrong. There will be somebody I meet and I really like, and she says, “You know, there’s something off about him.” And it always turns out she’s right, always. So I’ve learned, like when Jessica says, “These people are good,” or “These people are bad,” I should really listen. A lot of people don’t realize. Strangely enough, I’m actually sitting where the founders sit in Y-Combinator interviews. This is what the world looks like. What I see is what the world looks like to them, what’s behind me is the back of the room. We bring these people in for interviews, and I think a lot of them think Jessica is some kind of secretary, or something like that because she’s the one who smiles at them and greets them and remembers their name. We pepper them with questions about technical stuff during the interview and she doesn’t ask as many questions. What happens after the interview is they walk out. Basically, I’ll turn to Jessica and say, “Okay. Should we fund them?” Right? Because she is such a fabulous judge of people, and she really liked the Reddits. She called them The Muffins because she thought they were cute. So Jessica was really happy when we ended up funding the Reddits after all because she was bummed that we had to reject them. Andrew:  Okay. Let’s pause here and go back a little bit and talk about the people who started Y-Combinator with you. In that talk, you said that it’s important to get the right team together. On your team, it sounds like from the start you had Jessica Livingston, who was an investment banker at Adams Harkness before. You had Robert Morris, who was your partner at Viaweb and a long time friend. Paul:   And Trevor Blackwell. He worked on Viaweb too. Andrew:  Oh, Trevor Blackwell from Viaweb also. Paul:   Yeah, it was basically the same three people from Viaweb. Andrew:  Oh, so Jessica Livingston was at Viaweb with the three of you? I’m sorry, we had a little bit of a lag. Was Jessica Livingston . . . Paul:   No, no. No, she was not. Andrew:  Okay, so was it three of you? Paul:   Right, yeah. Andrew:  How did you find Jessica Livingston, and what was it about her? Paul:   I was [inaudible 00:07:23] her. Andrew:  Sorry? Paul:   I was going out with her. Andrew:  How did she go from girlfriend to partner? Paul:  Well, when we were going to start . . . we were going to start investing. And we didn’t know anything about the logistics of investing. She had one of these weird securities licenses. I think it’s called a Series 7, or something like that. She actually knows about this whole world. To this day, I have only skimmed our legal agreements. But she keeps this stuff in line. She knows how to do the mechanics of investing and we didn’t know how to do it. If it hadn’t been [inaudible 00:08:01] just the three of us, we would have never started this ourselves because who would have done all that crap. Or, sorry, who would have done all that very important work? Andrew:  Okay. So now you got to know her. What about Robert Morris and Trevor Blackwell? What did they bring to the partnership? Paul:  They’re very smart. I mean, they’re the smartest people I know. They’ve done the startup themselves. I mean, they have basically the same experience I do, in the same companies, and I can work with them. And Robert is our sys admin. Andrew:  I’m sorry? Paul:   Robert is our sys admin. Andrew:  I see. Paul:  We’re probably the only company that has a full professor at MIT as their grumpy sys admin. Andrew:  All right. So let’s go back then. Jessica Livingston sees these guys. She says, “I like them, there’s something about them. Let’s invest.” Paul:   Do you mean the Reddits? Andrew:  The Reddits, right. Yes, so you guys bring them in. What kind of structure, what kind of support system did you have back then? Paul:  It was pretty much the same as now. That very first summer. The reason we decided to invest in startups in batches all at once was because we didn’t know what we were doing, and so we thought, “Well, you know what we’ll do? We’ll have a summer program.” I don’t know if you have a programming background, but everybody treats summer jobs as kind of throw-away jobs as a programmer. You’re not expected to get a lot done. It’s just so the company can decide later if they want to hire you after you graduate. For both the hirers and the employees, summer jobs are kind of like a throw-away thing. So we thought, “Well, as long as everybody treats summer jobs as a throw-away thing, we’ll have this summer program, and if it turns out to be a disaster, no one will blame us. We can learn how to be investors at the same time these guys learn how to be startup founders.” The fastest, the most efficient thing is since it was going to be a summer program, it was synchronous. All these startups would get founded at once, just like everybody who works for Microsoft for the summer sort of shows up at about the same time. So the whole doing things in batch, we discovered by accident. But it worked so well, we decided, “All right, well, we’re going to keep doing this starting batches and startups all at once.” Initially, though, it was just an accident. Andrew:  What kind of help did you give them as you were doing this? I know about the weekly dinners that Alexis Ohanian said that he got a lot out of. I know that the entrepreneurs got to talk to each other and show each other their progress. What else did you do to support them along the way? Paul:  We got all their paperwork done. And we got them set up cleanly, so if there was some weird gotcha about the IP, like they had started working on the thing with their previous employer, we would tell them, “No, rewrite that code.” So by the time they got to the end, at demo day, they were like a clean start out, with no weird gotchas that would make investors barf, like former co-founders who were gone, but still had 30% of the company, or they didn’t own their IP, or someone hadn’t signed some agreement or something like that. And they were properly incorporated as Delaware C-corps instead of whatever broken LLC they came in with. All that stuff is not nothing. That’s actually the kind of stuff Jessica does. Demo day, everybody is in good shape as a company. We also gave them a lot of product advice. It turned out we had a knack for this, from having worked so long making web apps ourselves, literally since the beginning. Andrew:  How did you do that? That’s another thing that Alexis told me, that the idea for Reddit came from you and a lot of the entrepreneurs who you have backed have told me [inaudible 00:11:40]. Paul:  The idea for Reddit was a combination of us and them, okay? We told them we didn’t like their original idea and we said, “Come back and we’ll talk about other ideas,” right? But we didn’t say, “Look, here is a wireframe. Build this.” Andrew:  I see, right. You said, “Here’s an idea, go run with it.” And they did go out there, and actually it was an idea that you guys came up with together? Paul:   Yeah. Andrew:  But you led them in the direction. Paul:  But they came back. When they came back from the next day and we talked for quite a long time the next day, and we cooked up something in that. I called them on the phone and said, “We loved you guys, even though we rejected you. If you come back, we’ll figure out something new for you to do.” Andrew:  I see. So how do you do that? I mean, yes, you did create one of the early web apps. Yes, you did create Viaweb, and you saw it all the way through to a sale to Yahoo, and you got to see the inside of a big company like Yahoo. But that still doesn’t seem like enough experience to be able to sit down with an entrepreneur and say, “Here, I’m going to help guide you in that direction.” What else was it? Paul:  I have a weird ability to do this, or something like that. I don’t know why. But I often worry that it will stop working. But it’s almost like some weird knack that people have. Like people who can tell you that December 21st, 1960 was a Tuesday, you know what I mean? It’s like that. Because it’s true, it wasn’t that I had such an enormous amount of experience. Somehow I seem to be able to look at a web app and think, “No, this is wrong, this is right.” And now I can say it, “Well, it’s because I’ve worked with 172 startups. Now I have tons of experience, probably more than anybody else.” But I seem to always have some kind of natural ability to do this. Andrew:  Okay. So what did you learn from that first class? What did you learn from that first experience of working with a batch of entrepreneurs on new companies? Paul:  We learned a lot of stuff. We learned some of these we had done by accident were really good. Like funding a whole bunch of startups at once is really good because they can all help one another. We learned that young people can actually successfully start startups. I think in how to start a startup, I said, “You should probably be like 24, or 25, or something like that before starting a startup.” Some of these guys in that first Y-Combinator batch . . . Sam Altman was 19 and he was the best startup in the batch. So lo and behold, you can start a startup even younger than we thought. Which is not to say that is the only age you want to start a startup, but the age range of potentially successful startups extends frighteningly low. Andrew:  I think, actually, you said that the cutoff was 38 and you’re over 38, running essentially a startup with Y-Combinator. How do you . . . Paul:  No, I’m not. There’s one big difference between Y-Combinator and a product company. We do not have customers who can call us any random time because something is breaking. And that is what makes a startup so hard. The closest thing I have to that is Hacker News, but if Hacker News is down for a day, it wouldn’t be the end of the world. Whereas Viaweb was down for like 10-minutes, we would have a lot of really angry people calling us. So there’s a big difference. I can go on vacation. A startup founder cannot go on vacation because who’s going to watch things? Andrew:  I see. I happen to know that the guys from Airbnb prided themselves on getting as many minutes of your time as they could while you were building out their product. But you’re saying there’s a limit to when they could call you. If they had a question in the middle of the night, at 2:00, they’d have to wait till the next day to call you. Paul:  Yeah, I mean, the kind of questions that founders ask me are not usually the kind of things that have to be answered at 2:00 a.m.. Sometimes they are, like if someone’s getting acquired, or something like that. But even then, M&A guys aren’t doing stuff [inaudible 00:15:46] the morning. Andrew:  Right, and it’s not breaking at 2:00, well, it might, but not often. Paul:   Yeah, what can happen at 2:00 a.m. are like usually technical problems. Andrew:  All right. So let’s talk about, then, the second group of people. What did you do differently as you were assembling that group? Paul:  Well, the second batch, the biggest, most obvious thing that was different was we were in California. We decided in our second batch that we would try doing one in California, partly because it’s much nicer in California in the winter. So we could be self-indulgent and also ambitious at the same time. So we decided we didn’t want somebody to say, “We’re going to be the Y-Combinator of Silicon Valley,” right? After we’d started it because we could kind of see pretty early on people would start copying us. In fact, I’m kind of surprised it took as long as it did. But we didn’t want somebody to say, “We’re the Y-Combinator of Silicon Valley.” We wanted to be the Y-Combinator of Silicon Valley. So we thought, “All right. We’ll do a batch out in Silicon Valley.” We decided at the last minute to do it in Silicon Valley. The application form for that batch said on it, “We don’t know where it’s going to be. It might be in California. It might be in Boston. If you can’t do it in someplace, tell us here.” Right? And the only way we could get a space in time was to carve out a piece of Trevor’s robot company building, which is where I’m sitting now. To this day, we’re in the middle of this robot company. It’s kind of entertaining, actually. There are all these big robots driving around. Andrew:  This is [inaudible 00:17:16] any thoughts [inaudible 00:17:17]. Paul:   [inaudible 00:17:18] did we do? What else did we do differently? Andrew:  Yeah. Paul:  Not that much else, really. I mean, it was in the winter, so there was no question of it being a summer job for people. Andrew:  Did you get the sense, by then, of the kind of entrepreneur you wanted, that maybe there was a kind of entrepreneur that you thought you wanted but wasn’t a good fit? Was there [inaudible 00:17:41]? Paul:  We were getting better. We gradually got better. And we’re still not very good, even though we’re much better than we were when we first started. But we started to learn, for example, that it mattered a lot how much people actually wanted to do a startup. People who really did think of it just as a summer job at the end of the summer, they would go back to school, just like people do at a summer job. So we were starting to learn determination was the most important thing. Andrew:  How can you find determination? How can you know that somebody is determined for real, and not just, “This is it. I’ve got to . . . ” It’s not just a temporary thing? Paul:  That’s actually our single hardest problem, telling how determined people are. I mean, there are two things we care about: how determined people are and how smart they are. We can tell in a 10-minute interview how smart someone is. You just hit a few tennis balls across the net at them and see how hard they hit it back. Or if they whiff entirely. But telling how determined someone is in a 10-minute interview, we are often fooled. And actually the Y-Combinator alumni kind of hose us here because they tell people how to pretend to be determined during the interview. We meet these guys during the interview and they seem like real butt kickers, and lo and behold as the challenges of doing a startup emerge, they kind of fall apart. So we’re often fooled. It’s hard to tell, it’s hard to tell. You can’t just ask people, “So are you really determined?” It’s pretty obvious what the answer to that’s supposed to be. It’s hard. Andrew:  What kind of things does an entrepreneur do to fool you into thinking that they’re really determined? Paul:  Well, seeming really tough and calm during the interview. Why am I telling people [inaudible 00:19:31]? Andrew:  Because you guys are going to get better and as long as this information is out there, you might as well get it all the way out there and even the playing field. Paul:  That’s the danger of live interviews. Matt Maroon of Blue Frog Gaming, he was a professional poker player, I mean, talk about poker-faced. So he came in for his interview and he just seemed absolutely unflappable. We thought, “Boy, this guy is tough. This guy is not a wimp.” And actually, we were right. He was really tough. But to this day, he is genuinely unflappable, and I probably would want to fund more people who are really good poker players. I’ve noticed, empirically, there seems to be a high correlation between playing poker and being a successful startup founder. Andrew:  But then that’s not fooling you, that’s just . . . Paul:   That’s how you seem to tell. Andrew:  He had a calm, strong presence about him. What else? Did they tell you specific stories about the time that they sold candy in elementary school? Paul:  Oh, yes. Actually, that’s a good one, if people have evidence of their determination. For example the Airbnb guys, at one point they were running out of money in their startup. They’d been working on their startup for quite a while before Y-Combinator. I think maybe around a year or the bulk of a year. At one point, they were out of money, and they made their own packaged breakfast cereal with an Obama and McCain theme. You could buy either one, and we were like . . . yeah, yeah. I have a box of Obama-Os on the shelf behind me, in fact. I’ll tell you, I think they made like $30,000. They designed the box [inaudible 00:21:19]. Andrew:  They designed it, they sold it. Paul:  [inaudible 00:21:22] Yeah. You know, as soon as we heard that story, they were in, basically. There’s often a point in the interview where we all kind of look at one another and decide, “Okay. We’re funding these guys.” At that point, the remainder of the interview, we’re just chatting. As soon as we heard that story it was all over. They were in. Andrew:  What about Kevin Hale and the Wufoo guys? They also had similar experiences, didn’t they? Paul:   Yeah. Andrew:  What drew you to them? Paul:  They had Particletree. They had made Particletree, and I knew Particletree. I don’t know how I knew it, but I knew about this website and I knew it was really good. So I knew they could make good things. They were not just thinking, “Oh, maybe we’ll start a startup.” And then a few months later, they’ll say, “Oh, maybe we won’t.” Right? Obviously, they had some practice doing projects together and they could work well together. Andrew:  I see. So maybe one of the ways . . . Paul:   The Wufoo guys were terribly nervous during their interview. Andrew:  Were they? Paul:  Yeah. Oh, they were so nervous. I mean, we try everything we can to make people calm during the interview. Now we have people waiting outside, talking calmly to them before the interview because we don’t want people to be flustered during the interview. Our goal is not to try and break them. If people are nervous, all it does is add noise to the interview. We need all the signal strength we can get so we want people to be calm. But the Wufoos were only our second batch. We didn’t have anything to help people be calm or we didn’t write these instructions about how to ace your interview or anything like that. Now there’s this thing we send to people about how to do well in the interview. So Wufoos were so nervous, and after the interview, reactions were divided about whether to fund them. And I said, “No, they’re not stupid. They were just nervous.” It’s true. That was it. They were just nervous. Andrew:  There’s another situation where Kevin told me that he had one vision for what he wanted to do and you had another. You said, “Oh, what you’re looking to build are forms.” And he said, “No, not forms. Forms are these ugly things that don’t make sense. Nobody wants to be in the form business.” And he said, “No, Paul Graham said this is the opportunity.” In fact, he said, I think that the guys at Y-Combinator, he didn’t just say you, but the people sitting across the table from him helped him come up with the idea. Paul:   In the interview? Andrew:  Yes. Paul:  It often happens that the idea for the startup gets crystallized even in that 10-minute interview. What we do in the interview, we don’t ask, “So where do you see yourself in five years?” Or, “Why are manhole covers round?” Or some crap like that. I mean, what we do in the interview is we just start doing Y-Combinator. The first 10-minutes of Y-Combinator is the 10-minutes of the interview. So if we like a group, we just start. “Okay. What about this idea? What about this? You’ve tried this.” And that’s why people come out of the interview thinking, “Oh, my god. They asked us so many questions.” Our goal isn’t to badger them with questions and see what happens. The goal is to figure out the startup. That’s why there are so many questions. What should the startup do? It’s a momentous question. You’re going to spend years working on this. Andrew:  I see. How do you know if the business idea is going to be big enough? How do you know if there’s enough money in the form business? How do you know if there’s enough of a market around Reddit, or do you even know that? Paul:  We don’t. We don’t know that, and we don’t worry about that, that early. We don’t care that much about the idea. I mean, it would be bad if it were an obviously terrible idea. Like, start a new search engine with no features that are any different from Google. If someone was determined to do that as their idea, we would reject it. Okay? Actually, they’d be stupid. We should reject them. But unless it’s an obviously terrible idea, it’s not the idea that’s important. At this stage, we care about the founders. We’re going to have three months to figure out the perfect [inaudible 00:25:26] to the idea. Andrew:  Okay. Did you, by the way, get into search? I think you did. One of your startups was going to get into search, or . . . Paul:  It’s okay if people are doing a search that’s not exactly the same thing as Google. So for example, Octopart does electronic parts search. Those guys are really good, so that’s search. There’s a startup in the current batch that hasn’t launched yet, or at least hasn’t outed themselves, what I see as doing search. But again, that’s a specific vertical. That’s okay. That’s fine. Andrew:  Okay. Yeah, and web . . . I never know how to pronounce them, even though I use this. Paul:   WebMynd. Andrew:  WebMynd, that’s how you pronounce them? Web M-Y-N-D, of course. WebMynd. Paul:  They don’t do search themselves. Well, they do sort of do search. Yeah, they put search over on the right-hand side of Google Search. Andrew:  Yeah, they enhance Google Search. Paul:   Yeah, yeah. Okay, so they do search. Andrew:  Okay. Paul:  That’s funny, I thought of them as this plug-in for Google, but they do actually have to do some amount of search to make that work. Andrew:  Okay. I don’t want to stay too much on Wufoo, but I know them best because I’ve used them for years. So let’s continue there. You decided to back them. Did you have, at the time, an idea for an exit, or did you say, “This is an interesting . . . ” Paul:   No. Andrew:  No. What was your thinking in the future, here? Paul:  [inaudible 00:26:40] take care of themselves. It’s so impossible to predict something like that. You know, the founders themselves don’t know. I mean, think of all the stories about . . . like Larry and Sergey. They founded this company and it’s worth something like $200 billion. I don’t know what Google’s market cap is, but it’s gigantic. When they first started out, they were walking around to the existing search engines, trying to sell the technology to them for a couple million. So if the founders themselves can be off by many orders of magnitude about the exit, it’s stupid to even think about it. You just want to fund people who are good, and some of them will go public, and some of them will just explode on the starting line, and there’s not much you can do about it. Andrew:  Okay. So then they went through the program, they had a product at the end. And then you and Paul Buchheit invested in them. At that point, did you say, “Now I see an exit for myself. Now I see that these guys can go public or be sold”? Is it important there? Paul:  No, [inaudible 00:27:42]. Even then you can’t predict exits. They really are genuinely unpredictable. It’s better just to not think about it. Andrew:  To just say, “This is a good business, I see it growing. I’ll support them.” Paul:  Yeah, these guys are good. If they have some kind of exit at some point in the future, it’ll be good for them. We’re all in the same boat. We have the same kind of stock. So you have to assume that if they do something that’s good for them, it’ll be good for you too. Andrew:  Okay. All right. So let’s suppose somebody’s listening to this, and says, “Man, Paul Graham is incredible. He can help shape an idea, he can help draw out the best in you. I don’t have Paul Graham in my neighborhood.” Or, “Maybe I’m too old to fit the criteria.” Or, “Maybe I just want to fund my business myself. How can I find somebody like Paul Graham?” Paul:  Well, the first two don’t matter. You don’t have Paul Graham in your neighborhood. Most of the people who do Y-Combinator don’t come from the Bay area. They come from all over. They come from all over the world. So that doesn’t matter. And the thing about age, that doesn’t matter either. We funded a bunch of people over 40. I don’t think we’ve ever funded anyone over 50, but some of the most successful startups have been funded by people over 40. The third thing, you’re determined to fund a company yourself, well, why? If we’re willing to give you money, why not take it. I suppose you might not like the dilution, but a lot of people think it’s a good deal. So really, you could, if you wanted to, in all those cases. But if someone wanted to find someone local to advise their startup, I guess the best thing to do would be to do what I suggested in that original talk about how to start a startup. Find somebody who’s done it themselves and that’s the person to ask. Andrew:  I see. A lot of people don’t have this gift. A lot of people can’t, if you bring them an idea, rattle off a solution. I watched Jason Calacanis on This Week in Startup. Some guy will call up with an idea and he’ll kind of bat the idea back and forth with them and brainstorm until there’s something that’s fundable there. I don’t know a lot of people who can do that. How do you find those people? Paul:   You know, I don’t know. I don’t know. Andrew:  How important do you think it is to have that [inaudible 00:29:52]?   Paul:  Well, it’s very important. If that’s what you’re looking for from the guy. If your idea is not already perfect, if your idea is perfect, then any startup founder can tell you, “Okay. Here’s how to approach VCs. Here’s the right point to hire people. Here’s what not to do.” But if you still need to work on the idea, then you need to find somebody who can lunge ideas and I don’t know. I don’t know actually how you could recognize people like that because there are probably a lot of people who can do it badly. And, as a founder, how could you tell the difference between someone who did it well and did it badly. You can’t. So I don’t know. I don’t know. Why do I come here? Andrew:  Here’s something that I noticed about you from your writing. You seem to be looking for a formula for success in entrepreneurship that you’ll try to list all the reasons why companies fail and then hopefully at the end you’ll be left with reasons that they succeed, or you’ll try to figure out what it specifically takes. Am I reading it right? Paul:  Well, whenever you’re writing an essay, you don’t want to just do a lot of hand-waving and never get to the point. My goal in writing any essay is to make the strongest statement that you can make without being false. So whenever I’m writing anything, I’m trying to think, “All right. What do I tell people here? How do you get to the heart of the matter?” So it’s not just in the essays about startups. Everything I write, I’m trying to figure out what the heart of the matter is, otherwise, it’s useless. Andrew:  And are you also trying to find formulas? Is there a formula here that people could apply? Could say, “Look, this is a guy who has now worked with 177 startups.” Did I get that right, or 172? Paul:   One hundred and seventy-two. Andrew:  One hundred and seventy-two. Let me make that clear on my paper. “He probably knows the formula at this point, or if he doesn’t, when he hits 372 he’ll have the formula.” Do you agree at that point, there will be one? Paul:  No, no. There is not a formula, like an itemized list of stuff we could suggest to people, “Do this, do that.” Startups vary. But there are definitely some patterns. There are some things that work and some things that if you do them, they’re going to hose you. So launching pretty fast almost always works. Being highly engaged with your customers almost always works. Sitting around spending a long time noodling on the idea is almost always a mistake. It’s like a form of procrastination that you can convince yourself is work. Andrew:  I see. Okay, all right. Let’s take a look at some of the questions that people have put up on Hacker News. Max Cline has asked me about your personality. I’ve noticed it here too. Are you always this calm? Do you lose it? Paul:  No, I’m not always this calm. But I saw that question too and he asked if I threw chairs. No, I definitely don’t throw chairs. If I’m really mad, I’ll just sort of talk coldly to someone. Like this. Andrew:  I see. I’ve heard people . . . here’s the thing. A lot of entrepreneurs are now studying you for years. They’re in this community. You’re the leader of this Hacker News community of entrepreneurs who are developers. If you don’t like their ideas or disapprove of their progress, or if they perceive that either of those are true, they’re hurt. I’ve talked to a few people who felt that way. What are you noticing? Paul:  Did it help when I disapproved? Did it seem like a wake-up call, or did it merely depress them? Andrew:  I don’t know. I know that . . . Paul:  Well, there’s a big difference. I mean, if it’s a wake-up call, that’s good. And if it merely depresses them, then that’s bad. Andrew:  Well, I don’t know that I can make sweeping generalizations. I haven’t had that many conversations like that. Paul:   Well, when you find out, let me know. I’m trying to get better at this. Andrew:  You are? Are you actively trying to get better at the way that you communicate with them? Paul:   Oh, yes. Andrew:  How? What have you done that helps you communicate with them better? How do you bring out the best in people? Paul:  Well, one thing I’ve been trying to figure out is how to tell which people to keep nagging and which people to give up on. Because there are some people when basically we made a mistake. There’s always going to be some, we get to demo day, and we know they’re not going to raise money, and they probably know they’re not going to raise money, and they’re going to go back and get jobs. There’s always some percentage that are just doomed. So the ones that are doomed, it’s just tormenting them for me to keep nagging them and encouraging them. Because they’re not going to make it. Whereas there are others who are on the borderline, who might fail and might succeed, and then if I nag them and nag them and nag them, I can maybe push them over the threshold. So it’s one of these situations where right on this threshold you have two extremes of what you want to do. The guys who are just good enough, you want to nag enormously, and the ones who are not going to be good enough you want to nag not at all. It’s not a continuous function. There’s a step there and so it’s kind of hard to optimize. But I spend some time thinking about that. We spend time thinking about all aspects of how to make Y-Combinator better, not just how to give people advice, but how to pick startups, how to match them up with investors. It’s all new. Most of the stuff we’re doing is stuff people haven’t done in exactly that form before. So we can’t help thinking about how to try to do it better, how to try to do it better because we’re so bad at it. Andrew:  Really? Paul:   Really, yeah. Andrew:  You still consider yourself bad at it? Paul:   Oh, god, yes. Yes, we think of ourselves as just utterly terrible at picking startups. Andrew:  Why? What’s bad about the . . . Paul:  Because no hard choices are always wrong, that’s why. We have tons of evidence about bad we are. Andrew:  What do you mean? What’s your percentage of bad companies to good ones would you say? Paul:  At least a third are just disasters. In the venture business, generally, a lot of the investments are failures. Even a venture fund, which has a lot more at stake and spends a lot more effort on due diligence than our 10-minute interviews, even a venture fund, half the investments will be failures. So everyone in the venture business is bad. Maybe if we had more experience in the venture business, we would take this badness for granted and think, “Oh, well, actually, we’re really good if only a third of our investments are miserable failures.” But we’re not in the venture business and so it seems intolerable. We’re so often fooled. Andrew:  So the four of you might sit around, maybe with some entrepreneurs and try to bat around ideas about why that third didn’t work out. Paul:  Amongst ourselves, amongst ourselves. We talk about startups that we picked that we’re really glad we picked, and we say, “How do we recognize more people like that?” There are startups we were fooled by, and we think, “How do we stop being fooled in the future?” You know? We learned a lot from interviewing Wufoo. We learned how to tell the difference between people who are nervous and people who are lame. And we were figuring that out in that interview. So we get better from practice. Andrew:  Okay. What about the bad ones? What have you noticed that is disastrous? What kind of people? Paul:   Wimps. Andrew:  Wimps. Paul:   Yeah, it takes a [inaudible 00:37:02]. Andrew:  What’s a wimp look like? Paul:  They have a certain body language. You should really ask Jessica. Jessica is the expert at telling when people are going to wimp out. She’s so much more sensitive to this. She has a much more natural ability. When we were writing code in college, she was judging people’s characters. So both by nature and training, she’s so much better than I am. If I want to know if someone’s a wimp, basically, the high bit is ask Jessica. She’s the one who will tell you. Andrew:  I do have to have her here on Mixergy. I don’t know if you know, back when I had a bookcase behind me for I guess the first year of doing these interviews, I often put her book behind me, “Founders at Work,” knowing that if somebody saw my interview and recognized “Founders at Work,” even though the cover was a little blurry, and it was hidden behind . . . well, it wasn’t hidden. It was out there, but it was a little hard to see. If they recognized it, and they loved it, then they’re the kind of people I want in my tribe here in Mixergy. Paul:  Yeah, same with us. Actually, that book was . . . I mean, the way she chose who to interview for that book was who we ourselves wanted to hear the stories of. Andrew:  How did that factor into Y-Combinator, the book itself? Paul:    She was working on “Founders at Work” before we started Y-Combinator. The book came before Y-Combinator, and it was part of the reason we started it. That was one of the reasons I was thinking about startups so much because, for a long time, I didn’t think that much about startups. I was working at programming languages and then spam filters. But I was talking to her about it for that. Andrew:  I see, so she was telling you what she saw. What was it about that that inspired you to look into startups? What was it about the stories that she was collecting? Paul:  It wasn’t so much the specific stories. She hadn’t done a lot of interviews yet, but she was sort of thinking about this book when we were talking about whom she might go and interview. So we were just talking a lot about what startups are really like. And she didn’t know what startups were really like. For example, one of the big mistakes that people make about startups, people out in the regular world, and even founders, to some extent, they think it starts because there’s some brilliant idea, and success is fore-destined. I told her, “No, the idea changes a lot. People start out, they’re not even sure they want to start a company.” Google is the perfect example of this. So I would tell her what things were actually like in the startup world, and she was shocked. And yet she had worked for this investment bank that thought of itself as being involved in technology companies and no one in the company had a clue what startups were really like. So she was just astonished to hear all these stories from us and other startups founders who knew about what things were really like. Andrew:  Is that how you met? Well, no, she didn’t come to . . . you met her before she even wrote the book. Paul:   Oh, yeah. I think we’d been dating for over a year before YC got started. Andrew:  Okay. I’m going to go to another question from Max Cline. He asks a lot of interesting questions here. Saying, “If Y-Combinator company becomes a lifestyle company, can you guys still profit from the business, or do you need a [inaudible 00:40:20]? Paul:  No. I mean, there’s got to be an exit for equity holders to get any money. I mean, maybe in the future there’s some model where companies pay dividends instead of an exit, but we’ve never tried to get anybody to do that. We don’t have any real hopes about it, so no. Andrew:  Okay. So you’re thinking when you’re investing, you’d like to be able to sell out the company, you’re personally invested [inaudible 00:40:49] or go public. Paul:  There’s got to be some sort of liquidity and getting bought and going public are the two big forms of liquidity now. Although, there’s evolution in this world. Look at Facebook. Facebook stock is now liquid. And they’ve neither been bought or got public. So who knows what will happen in the future. In that effect, there’s no difference from us and anybody else doing venture investing. The only way to get any money out of this startup is some form of liquidity. Andrew:  I see. Why the name Y-Combinator? Paul:  It’s a trick in the lambda calculus. It’s a programming trick. I realized later that it was related to what we do, that the Y-Combinator is sort of self-referential in the way that Y-Combinator is. But, initially, I wanted to call it Y-Combinator just because I thought the Y-Combinator was a really cool thing. So it would be the perfect name for picking out the kind of people that we wanted. Hackers would look at this and think, “That’s so cool. They’re named after the Y-Combinator. There must be something going on here.” And suits would look at it and think, “Y-Combinator, what’s that?” That was what we wanted. We wanted hackers to notice us, and suits, we didn’t care. Andrew:  I see. And apparently it’s working. Well, I noticed you guys, but I didn’t know what the meaning was. Actually, I got to be honest. I still don’t understand it. I even saw it in Wikipedia before I did this interview. I probably would be the wrong person for you guys to back, then. I’m sure of that. Paul:  No, the Y-Combinator is notoriously one of the most contorted ideas in computer science. It’s the kind of thing you wouldn’t even think that something like this would be possible. I, myself, I can’t sit down and write out the Y-Combinator for you in lambda calculus. I have to look it up too. It’s not the kind of thing you actually use day to day in programming very much. It’s more of mathematical interest than practical interest. Andrew:  Okay. All right, what about this? All the companies that you guys back, within three months you’re able to get this beautiful user experience. I always know instantly what they’re about. I always can navigate them quickly, and they look beautiful, so beautiful that I’d be proud to show them as my own website if I own them. Within three months, you’re able to do that. How do you do that? How do you get that user experience? Paul:  I mean, I nag them. Some of them are great already. But the ones that aren’t great, I nag. I say, “Look, people showing up at some website, they don’t care about it as much as you, the founders, care about it. What you care about with most web apps is the person who shows up randomly. You don’t care about the person who’s already signed up for your service. They’re already sold. All they need is a little login button up in the right-hand corner. So what you care about is the person who randomly clicks on your website and has their finger poised over the back button.” Just think how many websites you visit every day, and most of them are no good. You just click on back, and you go on with your life. So you’re designing your website for the guy who’s just about to leave, he’s just on the cusp of even caring what you do. You know what your website does, but he doesn’t and he doesn’t even care that much. So you have to tell him. You have to say, “This website is about such and such,” right? And you have to tell him what’s he’s supposed to do there. The button we want you to click on is this big red one, in the upper left-hand corner. That’s what we want you to do. So at least he knows what he’s supposed to do. You know, I don’t want to click on it, or I do, but the thing that kills you is ambivalence, where he goes, “I don’t even know what this website is about.” How many times have you clicked on some link to some website and you think, “What is this startup even for?” You know? Andrew:  But there’s the curse of knowledge, as I think they said in the book “Made to Stick” that you’ve worked so hard on the site, you understand everything about it. To try to simplify it for somebody who’s brand-new is really hard there. And then to do it all in such a short period of time, to figure out design, is tough. Paul:   [inaudible 00:45:02] Andrew:  Do you guys have somebody on board who does that? Sorry. Paul:  No. It’s just like writing an essay. You have this big, complicated situation. You need to boil it down to its essentials. So I just look at the startup, and I think if I were writing something about it, how would I describe it. This is the essential thing. This is what they should say. We don’t have a graphic designer on staff, although we’ve been thinking of it. We have a lawyer now. We have a lawyer on retainer, who fixes the startup’s ordinary, everyday legal problems. That turns out to be huge. That is great. That has saved so much money and trouble. So we’re thinking of getting a graphic designer on retainer too, but we just haven’t got around to it yet. Andrew:  I notice that you have legal documents and you have had for a long time available to entrepreneurs documents that they can use for investors, and documents, I guess, that they use along that process. What about a set of documents for entrepreneurs who are just starting to team up, where they can help spread the ownership of the company properly, where they can ensure that they each own the IP. Paul:   We have that. Andrew:  You do have that [inaudible 00:46:04] Paul:  [inaudible 00:46:05] paperwork online. I mean, maybe it isn’t. But I thought it was, I think it is. Yeah, I think it is. Andrew:  Okay. So [inaudible 00:46:11]. Paul:   [inaudible 00:46:12] for starting a company, in the Series AA documents. Andrew:  I’m sorry. We just lost the connection for a little bit. So if I and this guy Wallflower on Hacker News decided to partner up because we like the way we’ve exchanged ideas here in the comments, we can go to Y-Combinator, get a legal document that we can use to split up ownership of the business, and then start working? Paul:   I think so. I think so. Andrew:  I’ll have to look, and if somebody in the chatroom knows, I’d love to see what you guys think of that. I’d love to see if you can find it, and maybe link us to it. Paul:  Go to Google and search for Series AA Y-Combinator. That’s what it’s called. Series AA. Andrew:  [inaudible 99:46:49] Paul:   Yeah, I think so. Andrew:  How do you find a partner? If you’re just working on your own, and you’re looking for somebody to team up with, how do you find that person? Paul:  You should work together with them. The two biggest ways people find co-founders is to go to school with them or to work with them at the same company because you don’t really know what someone’s going to be like until you’ve worked with them on stuff. They might seem smart, but they’ll turn out to be flakes or something like that. So what I would tell people, I think having a co-founder is very important. We’ve seen tons of evidence of this. We do fund some number of single-founder startups and they do worse than startups in multiple founders. There’s a lot of empirical evidence too. If you look at all the startups, all the technology companies that are most successful, very few of them have single founders. Even companies that seem now like they have one guy, like Oracle, initially they had more than one founder. He just came to the fore. Same with Microsoft, or Apple. Initially, you need a couple guys to spread the load over. So having a co-founder is very important and so what I would do is if you don’t have a co-founder, find a co-founder because not having a co-founder is going to kill you. That’s the part that’s going to kill you. So fix the part that’s going to kill you. Spend six months trying to find somebody that you can work with and then do the startup, instead of rushing into it unprepared. Andrew:  I see. So find somebody who you can maybe work with on a small project, maybe on Hacker News, maybe at a bar camp or some other event. Paul:  The project you work with does not have to be the startup. It’s just as well if it isn’t because then you don’t have to figure out how who’s in charge of what, and how to split the intellectual property, and what to work on. Just work together with them on some open source projects for a couple months and then you’ll know if they’re good. Andrew:  All right. Let’s talk about Hacker News. Why did you launch Hacker News? Paul:  Well, originally, I just wanted some kind of application to test this new programming language, Arc, on. If you’re going to write a programming language, you ought to write some kind of application in it to make sure it’s actually good for writing programs. So I wanted to write some kind of program in it and I had tried to convince the Reddits to create a sub-Reddit for startups. They were taking forever to make up their mind about what was the right way to implement sub-Reddits. They took a long time to figure out how to do sub-Reddits. They had [Inaudible 00:49:20] sub-Reddit first and that was a one-off. But general purpose sub-Reddits, where you could create about any topic, was much later. Eventually, this combination of desire to write some kind of application in Arc and be getting tired waiting for the Reddits to make a startup sub-Reddit made me decide I would start a website about startup news. And that’s what Hacker News was originally called. It was originally called Startup News. But after six months, we changed it to Hacker News because we got sick of reading about nothing but startup stuff. Andrew:  Was it to find news stories for yourself, or did you have a vision for what this community would do? Paul:  Well, we already had a whole bunch of YC founders at that point. We probably had 150, 200 founders. So we had this community of people who were interested in the same stories and they were the original users of startup news. It was like a news aggregator for those 200 people. Andrew:  I see. Okay. And who’s managing it now? Who’s deciding what stories get killed? Who’s the person behind . . . Paul:  Me, me. There are a bunch of editors, but I spend . . . it’s shocking. Probably one of the biggest surprises in my life is how much time gets sucked up by Hacker News. There’s just so much crap. There’s enormous amounts of spam, there’s like 1001 varieties of semi-trolls, some of them well-meaning, some of them just crazy. God, they suck up a lot of time. The whole site just sucks up a lot of time. I try to automate as much as I can, but it’s not that automatable. Andrew:  Is there a payoff in that, I mean in all the work that you’re spending there? Paul:  Well, it’s a great source of people applying to Y-Combinator, I think. I never tried to track it. But it means huge numbers of hackers spend every day looking at this little orange Y in the left-hand corner. That can’t be bad. At least they know about us. At least people know about us. So I think it’s good, but I’ve never actually tried to measure whether it’s good. It’s more like it just got started, and I got stuck into working on it, and now I spend too much time on it, but what am I going to do, shut it down? I don’t really make any conscious decisions about it. Andrew:  Who are the other editors? Paul:  YC founders. I think there are around 30 of them. They’re all people I know and trust, and they have good judgment and care about the site. But I’m not even sure, actually, who they are. I’m not sure which people are editors. There’s something I can go and look at and see who the editors are, but I don’t know. Andrew:  Okay. And if there’s somebody who’s stories automatically get killed, or specific sites that are automatically killed, that’s probably you saying, “No, I don’t want this as part of my community.” Paul:  Sites getting killed, anyone can do. Actually, anyone can ban a user too. But usually most of the people who get banned, unless they’re obvious spammers or trolls, like really egregious trolls who are obviously just think of themselves as trolls. Editors will ban them. Andrew:  Okay, okay. Can you say why certain sites get banned, even if they are in the hacker space, or in the news space? Are there certain things that you just don’t want, certain kinds of stories that don’t fit? Paul:  Well, most of the sites, the huge majority of the sites that are banned are just spammers. I don’t think there are an awful lot of sites that are banned that are related to the stuff that gets talked about on Hacker News. We wouldn’t ban a site unless it was . . . I think cracked.com was banned, for example because it’s crap. It’s deliberately created with fluff. I just doubt there’s anything interesting on there that would engage some intellectual curiosity. But that’s the kind of site that’s not a spammer site that’s actually banned. I’m not sure, though. It might not be banned. I’m not sure. Andrew:  Okay. All right. Finally, let me start asking you a little bit about my work, here. I love the community that you built there, that you built on Hacker News and around Y-Combinator and the influence it’s had on this whole space. I feel like who do I want to reach, who do I really . . . I don’t want to get a huge audience, I want to get the right audience. I’m looking at the people who care about your work and I’m saying, “They, to me, are the right audience.” How can I serve that audience well, Paul, with my interviews? Paul:  Well, it seems like you are. Hacker news, from what you say, it sounds like Hacker News is identical with your audience. And you seem to be pretty popular on Hacker News so it seems like you’re doing fine. I don’t think there’s anything you have to change dramatically. Andrew:  I have your kind of curiosity, though, about what it takes to build a successful company, and what the entrepreneurs are thinking of, and who they are. Do you have a sense of what you’d like to see, or how to bring that out of entrepreneurs? Paul:  Well, you want to ask different questions than news reporters generally ask. There are all these traditions in the news business that people now take for granted of asking sort of shallow questions that create controversy. For example, a sort of classic, old-fashioned, dumb-ass reporter, if they were interviewing Larry and Sergey, they would say, “So, Larry. What about China?” Right? I’m like, who gives a fuck about China? It’s just some political controversy. There’s nothing intellectually deep about it. What I care about is things like when did they make the architectural decision to make their search engine work on a whole bunch of crappy, cheap computers? That’s important. That’s not current events, and it doesn’t generate a lot of controversy in sort of cheap, short-term interest. So I would say the way to serve this audience, I mean, this is the kind of audience that doesn’t go for that kind of crap, mostly, unless there are people there that I would rather not have there. But be deep. Ask the questions that matter, instead of the kind that merely illicit controversy. It seems like you’re pretty good at that. Andrew:  I’m trying. I do feel like those other stories get more attention. Paul:   In the short-term, yeah, sure. But this is a different audience. Andrew:  I see. Okay. Paul:   Ask the questions that would be helpful to someone starting a startup. Andrew:  Do you see somebody who does that well now, who brings out those key moments in entrepreneurs? Paul:   You mean an interviewer who asks . . . Andrew:  Yeah, an interviewer or a writer. Paul:  [inaudible 00:56:03] questions. Yeah, I do see someone like that fairly frequently, in fact. Andrew:  You know what? Does she blog? I’d like to see a chapter of the next “Founders at Work” every week on her site. I could read that all day long. I know she doesn’t have the time for it anymore. Paul:  [inaudible 00:56:22] do one of these interviews. It takes her more than a week to do one of these interviews. Andrew:  I see. I get that. I wish she had more time to be able to do that. Would you please give her the space to go do that? Paul:  You know, that is her deepest wish. If she is watching this, she’ll be laughing so much at this point because that’s what she would like the most too, to be able to spend more time on the new version of “Founders at Work.” She’s working on a new edition, with a bunch of new interviews. Andrew:  Oh, wow. Paul:  Yeah, the big problem in her life is that she has to spend all her time on random crap and doesn’t get to spend enough time on the book. Andrew:  I’m going to have to ask her. Paul:   That’s the problem that everyone writing a book has, incidentally. Andrew:  That there just isn’t enough time to do it while you’re doing everything else. Paul:  Yeah, that they end up having to . . . because the book doesn’t have deadlines and other things. Do you have deadlines? Andrew:  Yeah. Paul:  Like this interview, it happens at a particular time. The crap work has evolved this protective mechanism to not get ignored, called deadlines. So if you look at what most people do, instead of their great vision for their life, they spend their time doing things that have deadlines. Andrew:  Yeah, like email. Answer it. Paul:  Yeah, yeah. So one of the secrets to getting stuff done is to be able to blow off stuff, even stuff that seems important. Andrew:  Let’s see. Piss off some people who have imposed a deadline on you just so you can get the stuff that you really care about. Paul:   Yeah, you probably have to piss people off to get really hard work done. Andrew:  All right. Well, thank you for doing this interview with me. I’m so glad to finally get to meet you and I hope I get to meet you at some point in person too. Paul:   Yeah, you should drop by dinner. Send me an email. Andrew:  I’m still in Buenos Aires, but when I’m back in the US, I’d love to come [inaudible 00:58:0]. Paul:   You’re in Buenos Aires? Andrew:  Yeah. Paul:   That is the Internet for you. Andrew:  Yeah. All right. Well, thank you. If you’re ever down here, we’ll have you over for a steak and a malbec. If not, I’ll wait till I get back to the US. Paul:   All right. Thank you very much. Nice to talk to you. Andrew:  All right, and thank you all for watching. If you have any feedback or comments, how can I become a better interviewer? Who else should I be interviewing? Please, bring it on. I always love to hear that stuff. Bye. Paul:   Bye.

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How to Start a Startup: A Summary of Paul Graham’s Essential Advice

Starting a successful startup is no easy feat. It requires dedication, perseverance, adaptability, and a bit of luck. For over two decades, Paul Graham has been providing invaluable advice to founders through his essays on startups. He co-founded Y Combinator, one of the most prestigious startup accelerators globally.

Graham’s wisdom comes from his experience as a successful founder, advisor, and investor. His advice provides practical tips and key mindsets essential for startup success. Here is a summary of his most critical points for aspiring startup founders.

Developing a Startup Idea

Every startup begins with an idea. But how do you come up with an idea worth pursuing? Graham emphasizes starting with problems you face yourself:

“The very best startup ideas tend to have three things in common: they’re something the founders themselves want, that they themselves can build, and that few others realize are worth doing.”

Trying to solve problems faced by real people you understand is much better than chasing hypothetical customer needs or copycat ideas. Build things you wish someone would make for you.

Graham also advocates starting small:

“If you can make something a small number of users love, you’re doing exceptionally well.”

Don’t be discouraged if your initial product is basic. Release it quickly and improve iteratively based on user feedback. Small early successes with real users can grow into something big.

Assembling a Founding Team

For Graham, having co-founders is non-negotiable:

“You need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong.”

Choose co-founders carefully based on complementary skills and shared vision. disputes between founders often kill startups. Vesting schedules can provide an orderly exit if needed.

Moving Fast in Early Days

Speed is critical in the early days. As Graham puts it:

“A startup is a company designed to grow fast.”

He advises focusing on quick growth over profitability initially:

“You make what you measure. If you focus on growing quickly each week, growth is what you’ll get.”

Release a basic v1 fast, recruit users manually, get feedback, and rapidly build v2. Don’t get bogged down trying to launch something perfect.

Relentless Improvement & Learning

“Keep pumping out features. Improve something in some way daily.”

Startups must build momentum through continuous small improvements and learning. Doggedly listen to user feedback and respond. Never stand still.

Budgeting Lean

In the early days, conserve cash zealously. As Graham puts it:

“Spend little. Get ramen profitable as fast as you can.”

Minimize salaries and expenses. Be scrappy and do things manually before you scale. Every dollar should go toward learning and growth.

Focus Intently on Customers

“Understand your users. Make a few users love you rather than lots ambivalent.”

Know your early adopters intimately. Obsess over delighting them. Give them incredible service. Make them raving fans before trying to expand.

Persevering Through Challenges

Startups face many hurdles. Things will go wrong. Grahams’ advice is:

“Don’t get demoralized. Don’t give up. Deals fall through.”

Persistence through difficulties is an entrepreneurial must-have. Stay determined but flexible. Keep your optimism in check to avoid disappointment.

Securing Funding Strategically

Graham cautions against both raising too much and too little funding:

“Take enough to get to the next step, but not so much you get locked into the wrong direction.”

Understand exactly how much runway you need to hit key milestones. When pitching investors, focus on conveying your expertise and traction.

Maintaining Focus & Priorities

Distractions are lethal for early stage startups with limited resources. As Graham warns:

“Avoid distractions, especially those that pay money like consulting.”

Stay obsessively focused on learning and growth. Don’t get enamored with quick revenue opportunities that detract from the core mission.

Key Mindsets for Founders

Some of Graham’s advice goes beyond tactical steps. He emphasizes cultivating an entrepreneurial mindset:

• Iterate rapidly:   “Most successful startups end up doing something different than they originally intended.”  Remain adaptive and willing to pivot.
• Create value:   “If you fix things that seem broken, you’ll build something of value.”  Focus on real user problems, not big ideas.
• Start small:   “Better to dominate a small niche than be marginal in a big one.”  Grow deliberately from a strong initial beachhead.
• Expect challenges:   “Assume the worst about machines and people.”  Mentally prepare for inevitable hurdles.
• Move fast:   “Economically, a startup is a way to work faster.”  Value speed, learning and flexibility over short-term gains.

How to Develop Startup Ideas People Want

Coming up with ideas for startups is challenging. You want to find an idea that is novel yet solves a real problem for people. Graham provides a framework for developing promising startup ideas systematically:

Look to your own experiences

Pay attention to problems and frustrations you face regularly in your daily life. The best ideas often arise from scratching your own itch.

Observe small inefficiencies

Don’t overlook problems that only mildly annoy you. Small frustrations that people have learned to tolerate present opportunities.

Notice gaps in products

Look for missing features, holes in user experiences, or needs not adequately addressed by current solutions.

Leverage your unique knowledge

Your specialized expertise in a domain exposes problems others may not see. Domain knowledge fuels creative ideas.

Talk to people with different experiences

Other people you interact with likely face frustrations you don’t. Discover unmet needs through conversations.

Pay attention to workarounds

When people devise clumsy workarounds, it often signals an underlying problem with current solutions.

Follow up on complaints

Don’t dismiss complaints as mere whining. Frustrations that make people complain out loud are promising starting points.

Zoom in on “hair on fire” problems

The best opportunities involve big pain points that people desperately want solved. Identify the most pressing frustrations.

Fall in love with the problem, not the solution

Ideas morph. Success comes from understanding user problems deeply, not having the perfect solution upfront.

By diligently following this approach, you can discover startup ideas that fulfill Graham’s criteria: addressing problems people care about that you can uniquely solve.

8 Keys to Building Habit-Forming Products

Incredible product design is crucial for startups to delight users. Graham emphasizes making your product compellingly habit-forming. Here are 8 techniques he advises:

Solve a frequent frustration

Choose a problem people encounter routinely. The more regularly the need arises the faster habits form.

Provide immediate value

The first interaction must provide tangible value upfront. Don’t make users wait for “aha” moments.

Keep it simple

Complexity is the enemy of habit formation. Distill your solution down to the absolute essentials.

Build for quick interactions

Habits require repeated small actions, not lengthy engagements. Target micro-moments.

Utilize reminders and prompts

Triggers bring users back frequently. Employ notifications, emails, texts, etc. appropriately.

Create variable rewards

Varying payoffs sustain interest. Provide surprises via personalized content, Easter eggs, etc.

Leverage natural drives

Tap into innately satisfying human drives: achievement, connection, competition, self-expression.

Continuously improve

Small ongoing enhancements delight users and fixes keep them loyal. Never stop iterating.

Building habit-forming products is challenging, but incredibly valuable. Utilize these techniques to hook users and create obsessive fans.

Choosing the Right Startup Funding Strategy

Raising startup funding is nuanced. Graham suggests being strategic about how much money to take and when:

Factor in your risk profile

Conservative founders should minimize early fundraising to maintain control. Aggressive ones can raise more upfront.

Only take what you need to hit milestones

Don’t raise too far ahead of your needs. Investors want to see progress between rounds.

Have a plan to be ramen-profitable fast

Target basic profitability quickly to extend runway. Then raise more once you’ve proven traction.

Build momentum before raising bigger rounds

The better your metrics, the better terms you can negotiate. Wait until you have strong traction.

Keep early rounds small

Raise small amounts initially while you find product-market fit. Startups need flexibility early on.

Only expand after nailing the model

Premature scaling wastes money. Prove repeatability before ramping up aggressive growth.

Maintain control of decision-making

Taking money from investors doesn’t mean letting them run the company. Protect autonomy.

Raising too much too fast can be as dangerous as raising too little. Match your fundraising pace to your progress and milestones.

How to Convince Investors to Back Your Startup

Fundraising is a skill. Graham explains how to craft a compelling pitch:

Demonstrate market opportunity

Show a big problem exists that consumers urgently want solved, that is better than current solutions.

Convey why you can win

Explain why your team and strategy will beat competitors. Lean on domain expertise.

Provide evidence of product appeal

Nothing persuades like traction. Showcase metrics, testimonials, usage data.

Talk specifically about users

Share specific stories of real users describing transformative experiences.

Emphasize exponential growth

Investors love hockey stick growth curves. Outline plans to scale aggressively.

Highlight your purpose

Communicate the “why” behind your startup. Mission and meaning matter.

Skip business model details

Models change. Focus pitches on problem, solution and traction, not monetization.

Demonstrate self-belief

Conviction is contagious. Investors back founders who believe in their startup.

Success ultimately depends on having a startup worth investing in. Refine your model until you can pitch with authentic conviction.

Choosing the Right Startup Metrics to Track

Tracking metrics helps startups learn and improve. Graham advises being thoughtful about what to measure:

User growth rate

This reveals how fast you’re acquiring users and if efforts are working. Compare week-over-week.

Customer lifetime value

Knowing value per customer helps determine sustainable pricing and profitability.

Monitoring churn shows if you’re delighting customers or need improvement.

Virality rate

For growth, analyze how users invite others. Tweak until you find viral fuel.

Engagement by feature

Spot which features drive stickiness and where users lose interest.

Funnel conversion rates

Pinpoint where users drop off in sign up, trials, purchases, etc. Optimize weak points.

Net Promoter Score

This measures user satisfaction and loyalty. High is 40+; low is below zero.

Customer acquisition cost

Calculate cost of acquiring each customer to guide marketing spend.

Carefully tracking metrics gives startups crucial feedback on what’s working, what’s broken, and where to focus energy. But don’t get analysis paralysis. Spend more time improving the product than analyzing.

Key Mindsets All Startup Founders Need

While doing valuable work is essential, mindset also plays a big role in startup success. Here are 5 founder mentalities Graham highlights:

Starting a business is a rollercoaster. Grit enables founders to power through the inevitable brutal periods.

Flexibility

Successful founders stay nimble and adaptable. They allow their ideas and plans to evolve.

Persistence through setbacks, rejections, and short-term disappointments is non-negotiable.

Sisu – This Finnish concept of stoic determination and courage drives founders through dark times.

Delayed gratification

Startups involve sacrifice. Founders must delay rewards for future gain.

Cultivating these attitudes provides stamina when efforts seem fruitless and resilience to rebound from failures. Build these mindset muscles intentionally.

Key Decisions When Structuring Your Startup

Startup legal structure has long-term implications. Graham highlights critical choices:

Corporation vs LLC

Weigh investor preferences, risks, taxes, and paperwork requirements. Many startups pick C-Corp.

State of incorporation

Delaware has startup-friendly laws but can be costlier. Consider home state too.

Vesting schedule

This governs how founder equity vests over time. Typically 4 years with 1 year cliff.

Stock option pool

You’ll need equity for employees. Set aside 10-20%.

Board composition

Decide arrangement of voting vs non-voting directors. Keep founders in control initially.

Share classes

Allows different rights for common shareholders, investors, employees.

Protective provisions

Give investors veto rights on key decisions to ease concerns.

Founder control

Maintain majority voting power when possible, especially early on.

Don’t just default to typical startup legal structures. Make deliberate choices tailored to your situation and goals.

When Does It Make Sense to Pivot or Persevere?

Pivoting requires effectively abandoning your idea to start fresh. Graham offers advice on when to stick it out versus changing direction:

Preserve core vision

Stay committed to the core problem you’re solving, even if solutions shift.

Question assumptions

Continuously test your hypotheses. Be ready to toss wrong assumptions.

Keep evolving based on feedback

Let customer input guide iterations. Don’t pivot impulsively based just on opinions.

Watch for exponential growth

If you see hockey stick adoption, persist. Slow linear growth demands change.

Consider opportunity costs

At some point, further optimization produces diminishing returns. Pivot before excessive sunk costs.

Be unsentimental

Judge ideas dispassionately. Don’t cling to solutions out of attachment.

Focus on trajectory

Isolate week-over-week trends. Pivot if metrics consistently worsen over time.

Change one variable at a time

Small iterative pivots are best. Don’t pivot product, market and business model simultaneously.

There are no fixed rules on when to pivot. Carefully weigh quantitative trends and qualitative learning to decide.

Key Startup Failures Modes to Avoid

Startups face many hazards. Here are 6 common failure modes Graham warns founders about:

Premature scaling

Expanding aggressively before nailing product-market fit will kill startups fast through waste.

Getting distracted

Lack of focus plagues startups. Shiny objects derail progress. Maintain ruthless prioritization.

Not listening to users

Failure to obsessively gather user feedback causes startups to build unwanted products.

Founder disputes

Infighting and lack of alignment corrodes startups from the inside. Ensure you have shared vision.

Running out of runway

Mismanaging cash burn forces startups to shut down or accept bad terms too soon.

Losing momentum

The graveyard spiral of stagnation must be avoided. Always make progress week-to-week.

Avoiding these pitfalls requires discipline, open communication between co-founders, and constantly learning from users. Be vigilant in order to dodge these startup killers.

Key Lessons from Paul Graham on Startups

• Ideas emerge from understanding people’s frequent frustrations
• Build for habit-forming daily use cases
• Match fundraising to reaching key milestones
• Obsess over delighting a small group of users first
• Continuously improve through rapid iteration
• Persist through the turbulent rollercoaster ride
• Maintain intense focus on learning & growth
• Cultivate grit, flexibility, tenacity and determination
• Pivot when necessary but preserve the core vision
• Avoid scaling prematurely or getting distracted

Paul Graham has mentored generations of founders, sharing hard-earned wisdom forged through experience. His advice provides invaluable perspectives for increasing the odds of startup success.

At the core, he emphasizes deeply understanding customer problems, assembling the right team, maintaining focus on learning and growth, and persisting through challenges. By internalizing his perspectives, founders give themselves the best chance at building companies that improve people’s lives.

Related Posts

Partha Chakraborty

Partha Chakraborty is a venture capitalist turned entrepreneur with 17 years of experience. He has worked across India, China & Singapore. He is the founder of Tactyqal.com, a startup that guides other startup founders to find success. He loves to brainstorm new business ideas, and talk about growth hacking, and venture capital. In his spare time, he mentors young entrepreneurs to build successful startups.

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Paul Graham 101

There’s probably no one who knows more about startups than Paul Graham. Having helped thousands of startups through Y Combinator, the startup accelerator he co-founded, there’s a thing or two to learn from his essays. And Graham’s wisdom isn’t limited to startups either; his essays, read by millions, touch on education, intelligence, writing, society, the human mind, and much more.

I’ve read all of Paul Graham’s published essays (200+), ending up with enough notes to fill a book. This post tries to summarize the parts I’ve found most insightful and provide an accessible starting point for someone new to Graham.

Whenever possible, I’ve included links to his essays so you can easily go to the source when something interesting catches your eye. (Indeed, I recommend it - use this post as a gateway to the good stuff rather than a complete account in itself).

If my description of Graham’s idea sounds interesting, expect his essay to be 100x better. Always go back to the essays, where the ideas are fleshed out in full. This post is a very shallow overview.

Nevertheless, I hope this post inspires you to read Graham’s essays. They’re worth your time.

Boring disclaimer stuff:

• I made a Google Docs version of this post, in case that's easier to navigate.
• I’ve included all essays that were published before November 2021 ( Beyond Smart is the latest essay included). You can find a list of all essays on Graham’s site .
• The info included is based on my interests at the time of reading the posts. Had I read an essay a year earlier or later, I’d likely have included something else. Plus, with over 200 essays, I’ve just downright overlooked and forgot important stuff. Again, I recommend you explore the essays yourself.
• This post does NOT cover Paul Graham’s thoughts or essays on programming / coding. I’m simply not interested in or knowledgeable about that stuff, so I didn't think it fair to talk about it. He’s written a lot about coding, so if that’s your interest, explore his essays yourself.
• Finally, if something seem off or missing, let me hear about it and I’ll fix it: [email protected] / Twitter

Okay, let’s jump in.

Paul Graham on Startups

Unsurprisingly, many of Graham’s essays are startup-related. Given his experience on the topic, there’s a lot to unwrap, including some classics like “Ramen Profitable”, “Do Things that Don’t Scale” and “Maker’s Schedule, Manager’s Schedule”. Let’s start with an overview.

Startups in 13 sentences :

• Pick good co-founders.
• Launch fast.
• Let your idea evolve.
• Understand your users.
• Better to make a few users love you than a lot ambivalent.
• Offer surprisingly good customer service.
• You make what you measure.
• Spend little.
• Get ramen profitable.
• Avoid distractions.
• Don't get demoralized.
• Don't give up.
• Deals fall through.

For a detailed account, try How to Start a Startup . 

This section presents some of Graham’s core ideas around startups, including the principles above.

Essays mentioned in this section:

Startups in 13 sentences

How to Start a Startup

Startup = Growth  

How to Make Wealth

After Credentials

The Lesson to Unlearn

The Power of the Marginal

News from the Front

A Student's Guide to Startups

What Startups Are Really Like

Before the Startup

Hiring is Obsolete

Why to Not Not Start a Startup

The Hardest Lessons for Startups to Learn

Organic Startup Ideas

Six Principles for Making New Things

Frighteningly Ambitious Startup Ideas

Black Swan Farming

Crazy New Ideas

Why There Aren't More Googles

Ideas for Startups

Jessica Livingston

Startup FAQ

Earnestness

Relentlessly Resourceful

A Word to the Resourceful

The Anatomy of Determination

Mean People Fail

Why It's Safe for Founders to Be Nice

Design and Research

A Version 1.0

What Microsoft Is this the Altair Basic of?

Beating the Averages

Do Things that Don't Scale

Ramen Profitable

Default Alive or Default Dead?

Maker's Schedule, Manager's Schedule

Holding a Program in One's Head

How Not to Die

Disconnecting Distraction

Good and Bad Procrastination

Don’t talk to Corp Dev

The Top Idea in Your Mind

The Fatal Pinch

Startups are fundamentally different

Startups aren’t ordinary businesses. “ A startup is a company designed to grow fast ”, it is fundamentally different from your standard restaurant or hair salon. All decisions reflect this need to grow. Indeed, Graham says : “If you want to understand startups, understand growth”.

“Economically, you can think of a startup as a way to compress your whole working life into a few years. Instead of working at a low intensity for forty years, you work as hard as you possibly can for four. This pays especially well in technology, where you earn a premium for working fast.” (From How to Make Wealth )

Startups are also vastly different from your school experience. Your tests at school can be hacked, but success at startups is unhackable. At school, you learned that the way to get ahead is to perform well in a test, so you learned how to hack the tests . But in startups, you cannot really trick investors to give you money; the real hack is to be a good investment. You cannot really trick people to use your product; the real hack is to build something great. Valuable work is something you cannot hack.

So you don’t need to be a good student to be a good startup founder. In fact, if your opinions differ from those of your business teacher, that may even be a good thing (if your business teacher was excellent in business, they’d probably be a startup founder). In a startup, credentials don’t really matter - your users won’t care if you went to Stanford or got straight A’s. (Related: A Student's Guide to Startups ) . 

Starting a startup is fundamentally different from a normal job , too. In a startup, experience is overrated . The one thing that matters is to be an expert on your users and the problem; everything else can be figured out along the way. “The most productive young people will always be undervalued by large organizations, because the young have no performance to measure yet, and any error in guessing their ability will tend toward the mean.” (From Hiring is Obsolete ). By starting a startup, you can figure out your real market value.

So, startups are fundamentally different from other companies, school and “normal work”. But why don’t more people start them? Graham has listed common excuses (and rebuttals) in Why to Not Not Start a Startup .

Startups are wealth-creation machines

So, startups are fundamentally different. You cannot really understand them by looking at other things. But what are they then?

Startups are one of the most powerful legal ways to get rich. If you’re successful, you can, in a few years, get so rich you don’t know what to do with all the money. But perhaps even better than the money is all the time a successful founder saves:

“Economically, a startup is best seen not as a way to get rich, but as a way to work faster. You have to make a living, and a startup is a way to get that done quickly, instead of letting it drag on through your whole life.” (From The Hardest Lessons for Startups to Learn ) 

In How to Make Wealth , Graham shows why startups are optimized for wealth-creation. (And for clarity, wealth is different from money: wealth is what people want, while money is merely the medium of exchange to get it. So a startup doesn’t actually create money, it creates wealth; in other words, it creates something people want, and people give money for that. This distinction may seem small but it’s important: “making money” seems really complicated while “making something people want” is far easier.)

Why are startups optimized for wealth-creation?

Leverage: If a startup solves a complex problem, it only needs to solve it once, then scale it infinitely with technology. So a startup, once it cracks the code, can create a lot of wealth rapidly. 

Measurement: The performance of every employee in a startup is easier to measure than the performance of every employee in a big organization. So if you perform well and create wealth, you’re in a better position to get paid according to your value in a startup.

More detail in How to Make Wealth . 

Good startup ideas come from personal need and they don’t sound convincing

While there are many ways you could get startup ideas, Graham has observed that most successful startups were founded because of a personal need. Fix something for yourself, and don’t even think that you’re starting a company. Just keep on fixing the problem until you find that you’ve started a company. (From Organic Startup Ideas )

He’s also observed that good ideas tend to come from the margins - places you’d not expect. The idea is often very focused - like a book store online or a networking site for university students - so it isn’t obvious how it would change the world; we dismiss the idea until it becomes obvious.

So, good ideas don’t initially sound like billion-dollar ideas - what even is a billion-dollar idea? Certainly not something we could recognize in advance. Indeed, the initial idea is usually so crude and basic that you’ll ignore it if you’re looking for a billion-dollar idea. The really big ideas may even repel you - they are too ambitious. 

A good idea doesn’t sound convincing because, for no one to have already taken it, it must be a bit crazy or unconventional. “The most successful founders tend to work on ideas that few beside them realize are good. Which is not that far from a description of insanity, till you reach the point where you see results.” (From Black Swan Farming )

Indeed, when someone presents a crazy new idea to you, and if they are “both a domain expert and a reasonable person”, chances are that it’s a good idea (even if it sounds like a bad one). “If the person proposing the idea is reasonable, then they know how implausible it sounds. And yet they're proposing it anyway. That suggests they know something you don't. And if they have deep domain expertise, that's probably the source of it.”

Graham also emphasizes that it is not the idea that matters, but the people who have them. 

Oh, and "Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats." ( Graham quoting Howard Aiken )

Nevertheless, if you’re in need of inspiration, Graham has some good starting points for coming up with startup ideas.

Founders make the startup

“ The earlier you pick startups, the more you’re picking the founders. ” Throughout his essays, Graham emphasizes the importance of the founders. More than anything - target audience, trends, TAM… - a startup’s success is influenced by the founders. (Obviously, the other employees matter, too. But founders are special, they are the heart and soul of the startup.)

“Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your cofounders is hard.” (from Startups in 13 Sentences ). 

Indeed, Graham notes that most successful startups tend to have multiple founders .

Earnestness and resourcefulness make a good founder

If the founders are the most important factor for a startup’s success, it is critical to understand what makes a good founder. Indeed, this is the topic of numerous essays.

According to Graham, a good founder is:

“The highest compliment we can pay to founders is to describe them as ‘earnest.’”

An earnest person does something for the right reasons and tries as hard as they can. The right reason usually isn’t to make a lot of money, but to solve a problem or satisfy an intellectual curiosity. This is why it’s important to figure out your intrinsic motivation or embrace your nerdiness (both of which we’ll discuss later).

“A couple days ago I finally got being a good startup founder down to two words: relentlessly resourceful.”

Relentless = make things go your way

Resourceful = adapt and try new things to make things go your way

Relentlessly resourceful people know what they want, and they will aggressively try things out and “hustle” until they get what they want. Consider the Airbnb founders and selling cereal .

Graham noticed a pattern around resourcefulness: when he talks to resourceful founders, he doesn’t need to say much. He can point them in the right direction, and they’ll take it from there. The un-resourceful founders felt harder to talk to. 

It is not the most intelligent who succeed, but the most determined . Smart people fail all the time while dumb people succeed just because they decide they must. 

"Make something people want" is the destination, but "Be relentlessly resourceful" is how you get there.

Oh, also: good founders aren’t mean. Mean People Fail and can’t get good people to work with them while startup founders who are nice tend to attract people to them .

Make something people want

If there’s one piece of startup advice to take from Graham, it’s this: “Make something people want”. (As you may know, this is also Y Combinator’s motto)

Yes, it is obvious. But it’s also pretty much the only thing that matters in a startup: if you just make something people want, you’ll attract users, employees, investors, money. “ You can envision the wealth created by a startup as a rectangle, where one side is the number of users and the other is how much you improve their lives .”

Indeed, many early-stage startups are “ indistinguishable from a nonprofit ”, because they focus so much on helping the users and less so on making money. Funnily, this approach makes them money in the long term.

“In nearly every failed startup, the real problem was that customers didn't want the product. For most, the cause of death is listed as ‘ran out of funding,’ but that's only the immediate cause. Why couldn't they get more funding? Probably because the product was a dog, or never seemed likely to be done, or both.” (From How to Start a Startup ) 

So how do you make something people want? Get close to users, launch fast, then iterate.

Get close to users

“The essential task in a startup is to create wealth; the dimension of wealth you have most control over is how much you improve users' lives; and the hardest part of that is knowing what to make for them. Once you know what to make, it's mere effort to make it, and most decent hackers are capable of that.” (From Startups in 13 Sentences ) 

“You have to design for the user, but you have to design what the user needs, not simply what he says he wants. It's much like being a doctor. You can't just treat a patient's symptoms. When a patient tells you his symptoms, you have to figure out what's actually wrong with him, and treat that.” (From Design and Research )

Since you may not precisely know who your users are and what exactly are their needs before you launch, it’s useful to yourself be a user of your product. If you use and like the product, other people like you may, too. This is why successful startups tend to arise from personal need.

Launch fast, then iterate

“The thing I probably repeat most is this recipe for a startup: get a version 1 out fast, then improve it based on users' reactions.”

The importance of iterations is highlighted in “ A Version 1.0 ”, “ What Microsoft Is this the Altair Basic of? ” and “ Early Work ”, among others. (If you understand the importance of iterations, then you understand that you must release a version 1 as soon as possible, so you can start iterating sooner.)

Some ideas from these essays:

• Don’t be discouraged by people’s ridicules of your early work. Just keep on iterating. (There will always be Trolls and Haters . Don’t mind them.)
• Don’t compare your early work with someone’s finished work. (If you wanted to compare your work to something, it’d optimally be a successful person’s early work. But people tend to hide their first drafts, precisely because they don’t want to be ridiculed.)
• When in doubt, ask: Could this really lame version 1 turn into an impressive masterpiece, given enough iterations?

Iterating and getting through the lame early work never gets easy. But Graham has listed some useful tips to trick your brain in “ Early Work ”.

Execution is a pathless land, but there is advice to be given

Mostly, a startup shouldn’t try to replicate what other startups do:

“If you do everything the way the average startup does it, you should expect average performance. The problem here is, average performance means that you'll go out of business. The survival rate for startups is way less than fifty percent. So if you're running a startup, you had better be doing something odd. If not, you're in trouble.”

Startup execution is a pathless land; there’s no formula to follow, even though many blog posts and thought leaders want you to believe otherwise. This is why it’s so important for the founders to be earnest and relentlessly resourceful: they need to figure it out themselves.

Even though there isn’t a connect-the-dots type of way to succeed in the startup world, Graham has observed hundreds (if not thousands) of startups from a very close distance, so he has identified general principles that help:

Do Things that Don’t Scale

“Think of startups not only as something you build and you scale, but something you build and force to scale.” 

“Startups take off because the founders make them take off. If you don’t take off, it’s not necessarily because the market doesn’t exist but because you haven’t exerted enough effort.”

At some point, your startup may grow on autopilot. But before you’re there, you need to do seemingly insignificant things, like cold emailing potential clients, speaking to people at conferences or offering “ surprisingly good customer service ”.

The “Do Things that Don’t Scale” advice helps us remember that building something great is only one part of the equation; we must also do laborious, unscalable work to get initial growth, no matter how great the product is.

Get Ramen Profitable

Ramen profitability = a startup makes just enough to pay the founders’ living expenses.

“Ramen profitability means the startup does not need to raise money to survive. The only major expenses are the founders’ living expenses, which are now covered (if they eat ramen).”

Significance: Ramen profitability means that the startup turns from default dead into default alive . The game changes from “don’t run out of money” into “don’t run out of energy”. While running a startup is never not stressful, reaching ramen profitability does take a weight off your shoulders.

To increase your startup’s chances of succeeding, increase your chances of survival; to increase your chances of survival, reach ramen profitability.

Maintain a Maker’s Schedule

To get into the making/building mindset, you need big chunks of time with no interruptions. You can’t build a great product in 1-hour units in-between meetings; “that’s barely enough time to get started”. If you think of the stereotypical coder, they prefer to work throughout the night, probably because no one can distract them at 3am.

“When you're operating on the maker's schedule, meetings are a disaster. A single meeting can blow a whole afternoon, by breaking it into two pieces each too small to do anything hard in.”

If you want to create great stuff, you need to be mindful that a manager and a maker operate on very different schedules. If you’re the manager, try to give big blocks of time for the maker; if you’re the maker, try to schedule all meetings on two days of the week so the rest is free for creating.

Holding a Program in One's Head expands on some of these ideas.

What not to do

Graham has also figured out something about the inverse: what not to do. Or, as he puts it, “ How Not to Die ”. 

• Keep morale up (don’t run out of energy)
• Don’t run out of money (for example, hire too fast)
• Don’t do other things. The startup needs your full attention. ( Procrastination is mostly distraction . Avoid distractions and you’ll avoid procrastination. Note, though, that you can procrastinate well .)
• Make failing unbelievably humiliating (to force you to give your everything)
• Simply don’t give up, especially when things get tough

To summarize this part on execution, here are Paul Graham’s Six Principles for Making New Things : 

• Simple solutions
• To overlooked problems
• That actually need to be solved
• Deliver these solutions as informally as possible
• Starting with a very crude version 1
• Then iterating rapidly

The more you focus on money, the less you focus on the product

Graham doesn’t often talk about money, and when he does, I get this weird feeling. It’s like “sure, we’re talking about money... but I’d rather we talk about the product instead.” Let me explain:

In Don’t talk to Corp Dev , Graham says all a startup needs to know about M&A is that you should never talk to corp dev unless you intend to sell right now. So it’s better to focus on the product until you absolutely must think about M&A.

In The Top Idea in Your Mind : “once you start raising money, raising money becomes the top idea in your mind”, instead of users and the product. So your product suffers.

When you get money, don’t spend it . “ The most common form of failure is running out of money ”, and you can avoid that by not spending money, not hiring too fast.

One instance when you should think about money is if your startup is default dead . “Assuming their expenses remain constant and their revenue growth is what it has been over the last several months, do they make it to profitability on the money they have left?” If you know you’re default dead, your focus quickly shifts to turning the ship around and reaching profitability; avoiding The Fatal Pinch .

In the long term, it’s obvious that the company that focuses more on the users and product beats the company that obsesses over investors and raising money.

Paul Graham on What to work on

What to work on is one of the most important questions in your life, along with where you live and who you’re with. While Graham’s treatment of this question definitely leans on the side of startups, you can also view his ideas from the perspective of side hustles, hobbies, projects (in or outside of a career) and so on.

What Doesn't Seem Like Work?

Why Nerds are Unpopular

Fashionable Problems

How to Do What You Love

You Weren't Meant to Have a Boss

A Project of One's Own

Great Hackers

Follow intrinsic motivation

If it’s something you’re intrinsically motivated about, that’s something where you have infinite curiosity, and that’s something you’ll eventually do well in. (Later, we’ll discuss how curiosity leads to genius.)

“ If something that seems like work to other people doesn't seem like work to you, that's something you're well suited for. ” Put another way: the stranger your tastes seem to other people, the more you should embrace those tastes. 

Because of the internet, you can make money by following your curiosity. This is a revolutionary shift : in the past, money was gained from a boring job, and you satisfied your curiosity during the weekends. But now, you can make real money just by following your curiosity, whether it’s from a startup or a YouTube or Gumroad account.

The two greatest powers in the world - money and curiosity - are getting more aligned each day. There has never been a greater time to follow your intrinsic motivation. Now, the important question is what to work on, not how to make money, because if you figure out an answer to the former, the latter question will answer itself. 

Turns out, nerds are far closer to figuring out the answer than non-nerds. (Nerds - or earnest people - do something for the sake of it, not to become popular or rich). Nerds in high school tend to be unpopular , not because they couldn’t figure out how popularity works and game the system, but perhaps because they don’t really want to be popular. That makes high school a tough time for them, but real life becomes much more fulfilling: while others are stuck in the popularity/status rat race and compete to work on Fashionable Problems , the nerds can follow their own curiosities, thus work on stuff no one else is working on, thus discover new things, thus succeed. Plus, they have a much nicer time doing so.

A question to figure out your intrinsic motivation and what to work on: “What are you a big nerd on?”

Let’s end this part with a sharp and practical observation from “ How to Do What You Love ”: 

“To be happy I think you have to be doing something you not only enjoy, but admire. You have to be able to say, at the end, wow, that's pretty cool. This doesn't mean you have to make something. If you learn how to hang glide, or to speak a foreign language fluently, that will be enough to make you say, for a while at least, wow, that's pretty cool.”

You should be working on your own projects

The logical conclusion of following your intrinsic motivation is that you should be working on your own projects (or other people’s projects where you have significant ownership). 

You may have noticed that projects you start on your own feel fundamentally different from tasks handed to you by a manager or teacher. And there’s a reason for that: “ You Weren't Meant to Have a Boss ”.

In that essay, Graham makes the argument that even though working in a large organization is the default now, it’s not how we evolved to work. A large organization is similar to the modern diet - consisting of pizza, candies and other processed foods - while a small group (like a startup) is the hunter-gatherer diet. One is easy and safe and appealing in the short term (but terrible over time) while the other is hard and unappealing, but more natural and better in the long term.

While working in smaller groups makes you happier and gives you more freedom, it’s also the way to do great work, as Graham argues in “ A Project of One’s Own ”. If a project feels like it’s your own, you have motivation and skin in the game that you don’t otherwise have. You’re much more willing to obsess over the details and make something great.

Work on things that you want to take over your life

“It's a mistake to insist dogmatically on ‘work/life balance.’ Indeed, the mere expression ‘work/life’ embodies a mistake: it assumes work and life are distinct. [...] I wouldn't want to work on anything I didn't want to take over my life.” (From “ A Project of One’s Own ”)

For startup founders, the startup is their life - there is time for little else, even sleep. Why would they willingly work 80+ hours a week and eat nothing but ramen , with no guaranteed financial reward, when they could work 40 hours a week and eat lobster at a big company? Because the startup is a project of their own, and they have - hopefully consciously - decided it’s something they want to take over their lives. “People will do any amount of drudgery for companies of which they're the founders.”

How do you know if something has taken over your life? Here’s a simple test: Do you think about it in the shower? 

In “ The Top Idea in Your Mind ”, Graham argues that if something is really important to you, then your mind will think about it subconsciously and ideas will appear in your head whilst walking or showering. Indeed, if this does not happen, you’ll have trouble doing great work - that’s your sign to reconsider what you work on.

Paul Graham on Thinking & Decision-making

Startup founders are an interesting group of people: they seek to change something about the status quo, which means they see something non-obvious that could be improved and they believe in that improvement so much that they’re willing to work 80+ hours a week and eat ramen until their vision becomes a reality.

What drives them? It can’t be just money - there are so many founders who’ve already gotten rich, and they still work in their companies and start new startups. And why aren’t there more founders? What qualities are there in a founder that you don’t find in non-founders?

By trying to understand this group of people, Graham has discovered a lot about thinking, decision-making, and the human mind in general.

The Four Quadrants of Conformism

The Two Kinds of Moderate

Orthodox Privilege

Novelty and Heresy

How to Disagree

How to Think for Yourself

The Bus Ticket Theory of Genius

Is It Worth Being Wise?

Beyond Smart

How to Work Hard

Mind the Gap

Being a Noob

How to Be an Expert in a Changing World

How Art Can Be Good

Taste for Makers

The Island Test

Independent-mindedness vs conventional-mindedness

Independent-minded people prefer to think through things for themselves, and because of this, they may seem weird to conventional-minded people (who follow the average and agreeable). Hence, it is almost a tautology to say that new ideas and new startups are the work of independent-minded people.

In The Four Quadrants of Conformism , Graham goes a bit deeper and differentiates between aggressive and passive forms of independent-mindedness and conventional-mindedness. Notably, aggressively independent-minded people tend to question existing norms and rules, working against them, while aggressively conventional-minded people work to maintain the norms and rules. There’s a clash between the groups, so it’s important for independent-minded people to “be protected”, be given space to innovate, break norms and come up with new ideas and things. (These “protected areas” are important for innovation. You could think of Silicon Valley as one.)

If you know someone is conventional-minded, you know a lot about them. Their beliefs and actions match the average, and you know what the average is. Whereas, if someone is independent-minded, you don’t really know them; they think things through for themselves, and thus they may arrive at conclusions you can’t imagine. In fact, on one issue, independent-minded people can be in the political left, and on another issue, in the political right; they are politically moderate by accident . A conventional-minded person is more likely either in the left or right for every issue.

Conventional-minded people have what Graham calls Orthodox Privilege : it seems to them that everyone is safe to express their opinions because everything they think about is conventional and uncontroversial. “They literally can't imagine a true statement that would get them in trouble.”

So if you do express your controversial, new ideas to them, they may regard them as untrue heresy. Novelty and Heresy go hand-in-hand. “It doesn't seem to conventional-minded people that they're conventional-minded. It just seems to them that they're right.” To them, anything that is unconventional is likely to be false; to the independent-minded, anything too conventional seems suspicious. So if you express your independent-minded thoughts publicly, you may want to learn How to Disagree .

In How to Think for Yourself , Graham shows there are some types of work that you can only do well in if you think differently from others: Scientists aim to discover something new, so being conventional-minded won’t get you very far; an investor who thinks exactly like everyone else will not get rich; a startup founder who shares the same ideas as everyone else won’t build great new stuff. You need to be right and most other people need to be wrong.

Of course, not every type of work is like this. You can be a good administrative worker without thinking differently from others; it’s not essential that everyone else is wrong. Generally, independent-minded people want to work in areas where newness is rewarded.

In How to Think for Yourself , Graham shares some exercises for training your independent-mindedness muscles.

Genius comes from infinite curiosity, intelligence, hard work and courage

We tend to think some people are just blessed with genius, that it’s an innate thing. But Graham has taken this black box apart and argues genius is something you can influence.

“ Those who do really great work have an unexplainable obsession about something ”. Infinite curiosity leads to surprising discoveries, simply because you think about and play with the topic more than any rational person would expect. And all that thinking and tinkering feels like play to you (but looks like work to others) because an obsessive interest “is a proxy for ability and a substitute for determination”. 

Intelligence

There’s a difference between wisdom and intelligence . If wisdom means a high average outcome across all outcomes, intelligence is a spectacularly high outcome in a few situations. If we think of “genius”, it tends to fit the latter description: you can be a terrible fool about everything else, but if you discover relativity, you’re a genius. 

High curiosity in something + high intelligence in that domain are a great beginning. But not necessarily enough to discover important new ideas. As Graham elaborates in Beyond Smart , there are smart people, and then there are those who have important new ideas; “There are a lot of genuinely smart people who don’t achieve very much.”

Intelligence and curiosity are perhaps necessary to become a genius, but not sufficient; you also need hard work to uncover new ideas and courage to pursue them, as developing something new challenges your ego (and irritates the conventional-minded people).

Hard work and courage

Even when you’re undeniably brilliant, you cannot avoid hard work. (Indeed, just knowing How to Work Hard can get you closer to sheer brilliance.) Hard work in itself isn’t the goal, though. Output matters (output being, in this context, important new ideas): “ If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush .”

When you start to do or learn anything new, you’ll Be a Noob at it first. But “the more of a noob you are locally, the less of a noob you are globally.” In How to Be an Expert in a Changing World , Graham notes that if your opinion was right once, it may not be right anymore because the world has changed. So it takes intellectual humility and courage to update your opinions to the new world, instead of clinging to the opinions you formed in the old world.

Putting together Graham’s thoughts, it seems like genius is not an innate quality that you can’t influence, but a combination of multiple qualities like curiosity, intelligence, hard work and courage.

Good taste is necessary for good work

Good taste is a quality related to genius. Some people seem to have an “eye” for design or an “ear” for music, but Graham shows, again, that taste is something you can develop.

”Taste is subjective” isn’t true, and you see it as soon as you start designing or writing or building things. There’s good art and there’s bad art , good writing and bad writing, nice design and less nice design. Saying “taste is subjective” is lazy and won’t help you improve your work.

So if you want to create better stuff, you need to realize that you may have poor taste and you need to develop good taste, normally by getting better at your craft or studying those who have good taste. “Good work happens when you see something is ugly, understand why, and have the ability to fix it into something beautiful.” (From Taste for Makers )

So what is good art or design? Graham gives a list (I redacted a few points):

• Solves the right problem
• Often slightly funny
• Uses symmetry
• Resembles nature
• Often strange
• Often daring 

Good work isn’t necessarily the most popular work; “There are sources of error so powerful that if you take a vote, all you're measuring is the error.” But if you do good work, eventually, people will appreciate it.

Is your argument testable?

If you read Graham closely, you notice that often when he makes an argument, he immediately considers what kind of test is needed to validate the argument. He’s thinking like a scientist: only accepting an argument if it’s testable.

Watch him do it in How to Do What You Love :

 “To be happy I think you have to be doing something you not only enjoy, but admire. You have to be able to say, at the end, wow, that's pretty cool. This doesn't mean you have to make something. If you learn how to hang glide, or to speak a foreign language fluently, that will be enough to make you say, for a while at least, wow, that's pretty cool. What there has to be is a test.”

And in The Island Test , he presents a test to figure out what you’re addicted to: 

“Imagine you were going to spend the weekend at a friend's house on a little island off the coast of Maine. There are no shops on the island and you won't be able to leave while you're there. Also, you've never been to this house before, so you can't assume it will have more than any house might.

What, besides clothes and toiletries, do you make a point of packing? That's what you're addicted to.”

In some cases, the way to make a point (and make it practical) is to devise a test. In How to Start a Startup , Graham explores what makes a good startup employee. He could just say “they are determined and will do whatever it takes”, but that’s not a testable argument, and not very practical for someone who’s hiring. 

Instead, Graham devised a test: “Could you describe the person as an animal?” If you could say “Jaakko is an animal” and don’t laugh but rather take the description seriously, that’s the person you want in your startup. An animal of a salesperson simply won’t take no for an answer; an animal of a programmer will stay up all night to finish the code; an animal of a PR person will pitch every newspaper in the city until your startup gets featured. 

Fun evening activity: Go through an essay you’ve written and see if each of the arguments you make is testable.

Paul Graham on Writing

Paul Graham is known for incredibly clear and simple writing. Each of his essays is easy to understand, no matter how complicated the topic. 

You can learn a lot about writing just by reading Graham, and doubly so if it’s an essay on the topic of writing. Fortunately for us, there are many such essays.

For starters, Graham has summarized his writing philosophy in Writing, Briefly . It’s an entire writing course, condensed into one (long) sentence. I recommend you read it now before continuing below.

Writing, Briefly

Writing and Speaking

The List of N Things

Persuade xor Discover

General and Surprising

The Age of the Essay

How to Write Usefully

Write Simply

Write Like You Talk

Economic Inequality

Writing is how you get ideas, develop ideas and improve your thinking

If you read Writing, Briefly , as you should, you noticed this:

“I think it's far more important to write well than most people realize. Writing doesn't just communicate ideas; it generates them. If you're bad at writing and don't like to do it, you'll miss out on most of the ideas writing would have generated.”

From an idea perspective, being a good writer is better than being a good speaker. You need good ideas to have good essays, but you can do a good speech without saying much at all. Though speeches can be better for motivation and personal touch, writing is better for ideas.

Don’t write to persuade, write to discover something new and useful

There are roughly two types of essays: those where you know exactly where it’s going before you start, and those where you have no clue where it’s going. 

We’re taught to write the first type of essay in school: we write the thesis statement in the introduction and ensure that the rest of the essay supports that thesis. We’re writing to persuade the reader, so that they’ll accept our thesis. A listicle is equivalent to that type of essay, and writing one doesn’t help you discover new ideas or knowledge. “ I worry that if I wrote to persuade, I'd start to shy away unconsciously from ideas I knew would be hard to sell .”

Paul Graham is a supporter (and practitioner) of the second type, writing to discover. In his mind, an essay is supposed to be two things: new and useful.

An essay should be new

If an essay doesn’t share something new or surprising, what good is it? When we write to discover, we want to surprise ourselves and the reader. Most surprising = furthest from what people currently believe . 

But just anything new doesn’t cut it. There’s constantly new info and news, and that doesn’t make a difference in our lives. What we should aim for is something General and Surprising . “Ordinarily, the best that people can do is one without the other: either surprising without being general (e.g. gossip), or general without being surprising (e.g. platitudes).” If you can do some combination of general and surprising (at least to some people), you’ve got a winning essay.

“ Essays should aim for maximum surprise. ”

An essay should be useful

What does it mean for an essay to be useful? Graham offers some ideas in How to Write Usefully : 

• When something is useful, it’s correct. If it’s merely persuasive, it could be false. “Good writing should be convincing, certainly, but it should be convincing because you got the right answers, not because you did a good job of arguing.” (From The Age of the Essay ) 
• “Useful writing makes claims that are as strong as they can be made without becoming false.”
• “Useful writing tells something important that people didn’t already know” (again, going back to the “surprise” idea)

Good writing is rewriting (in particular, rewriting to make the text simpler)

Just like in anything involving skill, the way to get better is through iterations. Good writing is rewriting . Because we can’t see someone’s drafts and rewrites, we compare their end product to our Early Work , then get discouraged looking at the gap. Instead, we must appreciate that something bad now could become great, if we iterate enough. 

“My strategy is loose, then tight. I write the first draft of an essay fast, trying out all kinds of ideas. Then I spend days rewriting it very carefully.” (From How to Write Usefully ) 

And when you rewrite, your main goal is to make your writing simple . Most of the time, the simplest words and simplest sentences are better than decorative, complicated words. Your purpose is to convey an idea, not to use fancy words and make the reader “do extra work just so you can seem cool.”

In Write Like You Talk , Graham shares a trick for writing simply: explain your ideas to a friend by talking; then, use that transcript as a draft for your essay. The spoken and written version of your idea should be as close to each other as possible. “If you simply manage to write in spoken language, you'll be ahead of 95% of writers.” 

When possible, find a metaphor for your idea

This is not direct advice from Graham (though he does recommend you write simply, and what’s simpler than a great metaphor?) 

Instead, this is a theme you notice if you read a lot of Graham. Metaphors are a weapon he wields often.

Some of my favorite metaphors from Paul Graham:

“There's an Italian dish called saltimbocca, which means ‘leap into the mouth.’ My goal when writing might be called saltintesta: the ideas leap into your head and you barely notice the words that got them there.” (From Write Simply )

“People don’t realize that scrapping things together is how big things get started. They unconsciously judge larval startups by the standards of established ones. They're like someone looking at a newborn baby and concluding ‘there's no way this tiny creature could ever accomplish anything.’” (From Do Things that Don’t Scale )

“The list of n things [listicle] is in that respect the cheeseburger of essay forms. If you're eating at a restaurant you suspect is bad, your best bet is to order the cheeseburger. Even a bad cook can make a decent cheeseburger. And there are pretty strict conventions about what a cheeseburger should look like. You can assume the cook isn't going to try something weird and artistic. The list of n things similarly limits the damage that can be done by a bad writer.” (From The List of N Things )

“Sometimes it's because the writer only has very high-level data and so draws conclusions from that, like the proverbial drunk who looks for his keys under the lamppost, instead of where he dropped them, because the light is better there.” (From Economic Inequality ) 

“If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush.” (From Mind the Gap ) 

“I'm not sure why. It may just be my own stupidity. A can-opener must seem miraculous to a dog.” (From Taste for Makers )

“A startup is like a mosquito. A bear can absorb a hit and a crab is armored against one, but a mosquito is designed for one thing: to score. No energy is wasted on defense. The defense of mosquitos, as a species, is that there are a lot of them, but this is little consolation to the individual mosquito.” (From How to Make Wealth ) 

“The independent-minded thus have a horror of ideologies, which require one to accept a whole collection of beliefs at once, and to treat them as articles of faith. To an independent-minded person that would seem revolting, just as it would seem to someone fastidious about food to take a bite of a submarine sandwich filled with a large variety of ingredients of indeterminate age and provenance.” (From How to Think for Yourself )

Paul Graham on Society

Startups turn into big companies, startup founders turn into billionaires , products used by hundreds turn into products used by millions... If you’re working to help startups, you’re working to change society in a big way. 

The Refragmentation

Inequality and Risk

What You Can't Say

“Reducing wealth inequality” isn’t as great as it sounds

As we established earlier, a startup is a wealth-creation machine. As such, it shouldn’t surprise us to see Graham discussing wealth inequality and why it isn’t the demonic thing many believe.

Wealth inequality is a divisive topic, and one I’m no expert in, so I’ll try to provide a general overview without twisting Graham’s ideas into something they aren’t. You might want to read the essays in full if you’re interested in the topic.

By default, we think wealth inequality is inherently bad. 

In Mind the Gap , Graham presents three reasons why we think wealth inequality is inherently bad:

• The Daddy Model of Wealth: We confuse wealth with money and think there is a fixed amount of it. And if there’s a fixed amount, we believe it should be distributed equally. (By now, you should realize that wealth is different from money, and that you can create wealth; there is no “fixed amount” or “fixed pie”; you can increase the pie)
• We think people get rich today like they got rich earlier: In the past, the rich people tended to get rich by stealing (through war or taxes). So some people still believe rich people have gotten rich by stealing, even though today the much better, more reliable, faster and legal way to get rich is by creating wealth, not stealing it.
• We don’t understand leverage: Technology increases the gap between the productive and the unproductive, thus increasing wealth inequality. If a CEO is 100x richer than an employee in the same company, we think it unjust because there’s no way the CEO works 100x more than they do. But because of leverage, the CEO can easily be 100x more productive than an employee, or make decisions that are 100x more valuable. “I have no trouble imagining that one person could be 100 times as productive as another.”  

Wealth inequality can be a sign of good things.

“Variation in wealth can be a sign of variation in productivity. (In a society of one, they're identical.) And that is almost certainly a good thing: if your society has no variation in productivity, it's probably not because everyone is Thomas Edison. It's probably because you have no Thomas Edisons.

In a low-tech society you don't see much variation in productivity. If you have a tribe of nomads collecting sticks for a fire, how much more productive is the best stick gatherer going to be than the worst? A factor of two? Whereas when you hand people a complex tool like a computer, the variation in what they can do with it is enormous.” (From Great Hackers )

“By helping startup founders, you’re helping to increase economic inequality. If economic inequality should be decreased, no one should be helping founders. But that doesn’t sound right.” (From Economic Inequality )

There are many causes of economic inequality. Some of them are bad, like corruption and stealing. But some causes are generally good, like variation in productivity. Some people are vastly better at creating things people want, so it’s unsurprising they are able to make more money than other people.

Remember that startups grow the pie: they get rich by making other people richer. Because they are rich doesn’t mean you must have been screwed over. It’s more like the opposite: the Google founders are rich because they have made life easier and richer for billions of people.

Of course, wealth inequality isn't only due to startups (although startups create the most extreme results). Some people’s salaries are higher than others’, again, because some produce more wealth than others. Salaries are closer to market price than ever before , and get constantly closer, as people are more free to start their own companies, switch companies and work internationally.

Taxing the rich reduces economic inequality, but may not lead to the results you’d hope for. 

If you want to make the poor richer - as is probably the intention when you want to reduce economic inequality - you can either take the money from the rich, or make the poor more productive so they’ll get richer (through education and infrastructure, for example). But if you make people more productive, some people will create 1,000x the results as another, so economic inequality remains. 

So if you want to reduce economic inequality, the only way is to push from the top - to take money from the rich (see Inequality and Risk ). Thus, you reduce the rewards for creating or funding startups and business activity, thus you hinder technological innovation. This doesn’t sound as positive as “reducing economic inequality”. Especially when you consider the many different kinds of inequalities beyond income equality.

The gap between rich and poor is increasing in monetary terms, but probably closing in wealth terms. Today, the average person lives a relatively similar life, materially, to a rich person: both have a fridge, a car, a phone, Netflix… 100 years ago, the rich had a car while the poor didn’t, they had things we now regard as “essentials” while the poor didn’t. Through businesses, essential products are getting cheaper and more accessible to everyone. In many cases, the rich can pay to have a flashier version of something, like a sports car or brand watch, but the basic, affordable version is still good enough.

Today, the difference is appearance and what brand your stuff is; in the past, the difference was either having it or not having it. So yes, the income gap is increasing, but with it, the gap in quality of life is decreasing.

“You need rich people in your society not so much because in spending their money they create jobs, but because of what they have to do to get rich. I'm not talking about the trickle-down effect here. I'm not saying that if you let Henry Ford get rich, he'll hire you as a waiter at his next party. I'm saying that he'll make you a tractor to replace your horse.” (From Mind the Gap ) Trickle-down economics is a bad argument because it misses the point. We need to look at how wealth is created, not how it’s used

Graham’s proposition:

Allow those who create wealth to keep it.

When you’re allowed to keep the wealth you create, people can get rich by creating wealth instead of stealing it. People take bigger risks if they can keep more of the upside when those risks pay off. A startup founder never captures all of the wealth created; most of the wealth is transferred to other people, so we should encourage those who want to get rich, not discourage them.

Based on these ideas, you can probably guess Graham’s opinions on capitalism vs communism (something he discusses in the essays linked in this section, particularly in How to Make Wealth and Mind the Gap ).

Not everything we think is true is true, and not everything we think is false is false

“At every period of history, people have believed things that were just ridiculous, and believed them so strongly that you risked ostracism or even violence by saying otherwise. If our own time were any different, that would be remarkable.” (From Taste for Makers ) 

“And yet at every point in history, there were true things that would get you in terrible trouble to say. Is ours the first where this isn't so? What an amazing coincidence that would be.” (From Orthodox Privilege ) 

Not everything we think is true is true, and not everything we think is false is false.

Graham comes back to this idea repeatedly, particularly in the essays discussing independent-mindedness and conformism (see above). But you can see tones of this idea in his startup essays too; after all, a successful startup has a vision of a future that most other people do not believe in at the time. 

Graham deep-dives into this idea in What You Can't Say , an essay I consider one of his finest - one you must read for yourself. In fact, the whole essay is so intellectually important that I’d do it a disservice by summarizing. Instead, here’s the main takeaway I was left with:

There are things you believe that are incorrect, horribly so. To you, they seem correct without question. Stay open-minded.

Paul Graham on Life

If we accept that writing is thinking (as we addressed earlier), Graham, with over 200 essays and decades of writing, has done a lot of thinking. When he shares life wisdom, you’d be smart to listen.

What You'll Wish You'd Known is sort of Paul Graham’s compilation of life wisdom, targeted at high school students. It’s also one of his most popular essays. While you should read it yourself, here are a few major points that stood out for me:

• It’s okay to not have a plan. In fact, it may be better not to fixate on one plan when you’re young. Optimize for optionality. If you’re unsure, go with the option that gives you more options later down the line. 
• Build something. Work on something hard on your own, doesn’t really matter what it is. You’ll learn so much about yourself in that process. This is a shortcut to finding what you want to work on, which is one of the major questions in life. “If I could go back and redo my twenties, that would be one thing I'd do more of: just try hacking things together. [...] I should have spent less time worrying and more time building. If you're not sure what to do, make something.” (From The Power of the Marginal ) 
• How you succeed in school is in no way representative of how you succeed in life. “One of the most dangerous illusions you get from school is the idea that doing great things requires a lot of discipline. Most subjects are taught in such a boring way that it's only by discipline that you can flog yourself through them.” At school, stuff is forced on you; in real life, it is the stuff you initiate that matters and defines your trajectory.
• “There's no switch inside you that magically flips when you turn a certain age or graduate from some institution. That’s not how you become an adult. You start being an adult when you decide to take responsibility for your life. You can do that at any age. [...] The important thing is to get out there and do stuff. Instead of waiting to be taught, go out and learn.”

Beyond that essay, there are a few bigger themes I want to highlight below.

What You'll Wish You'd Known

Life is Short

The Acceleration of Addictiveness

• How to Lose Time and Money

Lies We Tell Kids

Keep Your Identity Small

Cities and Ambition

The Top of My Todo List

Life is short

“Life is short” is one of those statements everyone kind of agrees with, without giving it too much thought. But Graham has explored the idea a bit deeper.

For starters, a startup itself is a way to appreciate the shortness of life or adapt to it ; instead of a 40-year career, you compress your income-making to a few startup years and thus free up time for activities beyond making a living. The average human lifespan is increasing while the minimum possible time it takes to be set for life is decreasing; startups are one way to maximize the gap.

Whether you agree with the premise that Life is Short , it’s easy to agree that one way to make life seem less short is to minimize anything unimportant. If you do nothing for 5 hours, that 5 hours will feel excruciatingly long. The more we have going on, the shorter life feels. So we should cut all the things we don’t like doing, the stuff that we think life is too short for (Graham calls this, bluntly, “bullshit”).

And if we invert the argument, we realize that we should dedicate more time for the important stuff. If people and relationships are important to you, your calendar should reflect that. When life is short, we must ruthlessly cut the unimportant while making time for the important. Sounds simple and easy to dismiss, but somehow, Graham applies weight to it in Life is Short .

It’s surprisingly easy to waste your life if you’re not careful

Since life is short, it’s easy to let it slip away in a blur if you’re not careful.

One thing you get easily sucked into is “ anti-tests ”. These are tests you can try to excel in, but the way to come on top is to not care about the test at all, to ignore the test. So you could try to be popular in school, but you probably shouldn’t care about popularity; you can try to become important and high-status in life, but you probably shouldn’t care about that. Just because there’s a test doesn’t mean you should try to perform well in it. 

Ignoring tests is especially hard for intelligent, ambitious people, because their ambition provides the motivation and intelligence the means to do well in the test. But try not to get sucked into the anti-tests in life; they are the kind of “bullshit” life is too short for.

Another thing that can corrode your life, if you’re not careful, is addiction. We know to be careful with the standard stuff like alcohol and gambling, but it’s harder to avoid addictions that everyone has because those seem normal to us. In The Acceleration of Addictiveness , Graham makes a division between two normals: statistically normal (that which everyone does) and operationally normal (that which works best). Being addicted to social media and your phone is statistically normal, but not operationally normal. “ Technology tends to separate normal from natural. ”

“ You can probably take it as a rule of thumb from now on that if people don't think you're weird, you're living badly. ” For example, if your approach to consumerism doesn’t seem a bit weird, you probably own too much Stuff .

But being careful about pleasures and self-indulgence and “the bullshit” isn’t enough. We must also be careful about the things we do that feel important and productive. In How to Lose Time and Money , Graham writes: 

“It's hard to spend a fortune without noticing. Someone with ordinary tastes would find it hard to blow through more than a few tens of thousands of dollars without thinking ‘wow, I'm spending a lot of money.’ Whereas if you start trading derivatives, you can lose a million dollars (as much as you want, really) in the blink of an eye.”

Similarly, for a fairly ambitious person, it’s hard to waste your time by watching TV or laying on the sofa - your brain will start thinking “this is a waste of time” sooner or later. But you can easily work 12h a day for 2 years on something that, in retrospect, was a complete waste of your time. 

If you’re not careful about where you invest your time and money, life passes by surprisingly easily. 

You have a lot of unconditioning to do

What’s a lie you were told as a child? Stuff like “if you swallow an apple seed, a tree will grow in your stomach” is easy to identify as a lie. But stuff like “be careful with strangers, they are dangerous”? Less so.

In Lies We Tell Kids , Graham shows that we’ve been lied to as kids, for a variety of reasons (some better than others). Some falsities have flowed into our heads at home, some at school, but the main idea is that we’ve woven lies into our understanding of the world at a young age. And if it’s something we learned as a child, it feels undeniably true as an adult; it takes serious effort to take apart these deep-held beliefs.

As a rule, if you think it’s true because you learned it in school or in your childhood, assume it is not true. It’s better to verify it for yourself, even if it turns out to have been true all along.

If childhood beliefs are a good place to start unconditioning, a good place to continue is whatever you identify as (democrat, minimalist, crypto bull…). This is because we have a terribly hard time thinking clearly about something that’s part of our identity , so you may have taken in opinions one-sidedly. If you identify as x, criticism against x feels like a personal attack because x is a part of your identity, part of you. The bigger your identity, the more you have to process and rethink. 

Another thing to uncondition comes from Cities and Ambition . When most people talk about the essay, they consider the obvious implication: you should go to the city that matches your ambition. So if you want to be in the show biz, go to Hollywood, or if you’re into startups, go to Silicon Valley (or, increasingly, the right corner of the internet). But there’s an inverse consideration, too, and it’s an important one: the places you’ve already lived in have subconsciously influenced your ambition. So, yes, we could match the city we live in to our ambition, but before we do that, we should figure out whether our ambition really is our own or if it’s simply a product of where we have lived in so far.

This idea of unconditioning links back to the earlier point: because you’ve been conditioned a certain way, you’re set on a path that you may not wish to be on, had you consciously made the choice. So unless you do uncondition yourself, it’s easy to waste your life.

You have a lot of unconditioning to do. So better get started.

Paul Graham’s 5 commandments for life

Bronnie Ware, a palliative care nurse, made a list of the biggest regrets of the dying:

• Forgetting your dreams
• Ignoring family
• Suppressing emotions
• Neglecting friends
• Forgetting to be happy with what you have

In The Top of My Todo List , Graham inverted the regrets into his 5 commandments to live by:

• Don’t ignore your dreams
• Don’t work too much
• Say what you think
• Cultivate friendships

Paul Graham’s Best Essays

Paul Graham’s favorites ‍

This is in addition to the three that get the most traffic: https://t.co/zsxRpKm4ew https://t.co/nROmN4eyhO https://t.co/O8hIcjcMd2 I should also have included: https://t.co/CUBGEQ9N7H https://t.co/bAcAN5wROL https://t.co/MVTTJDzyQ2 https://t.co/OKZOGIhi4i — Paul Graham (@paulg) December 20, 2019

My favorites

• What You Can't Say  
• How to Think for Yourself  
• You Weren't Meant to Have a Boss  
• How to Make Wealth  

Final words

This has been nothing but a short introduction to Paul Graham’s ideas. There are so many essays and ideas and topics that weren’t included here, so, who knows, maybe at some point there will be a PG 201. 

Anyhow, I hope this has inspired you to explore the essays yourself and gives you a convenient way to find the essays that interest you. 

If you found this summary useful, please feel free to share around. It took me nearly a year to read all the essays and turn my notes into something useful, so it’d be awesome if many people knew about this.

And if there’s something you’d like to add / edit, reach out: [email protected] / Twitter

Thanks for reading.

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Thoughts over a cup o' joe.

16 lessons from Paul Graham on starting a startup

Paul Graham runs Ycombinator, a Silicon Valley based startup incubator. He previously started and sold Viaweb to Yahoo.

Paul’s essays have had a tremendous impact on how I think about projects, business, and life.

Below are just a few of my own reflections as I’ve read through a few of the posts on his website.

Perhaps these lessons might help someone on their own startup journey.

Lessons from Paul Graham’s Essays

• Create an easy way for people to pay you for it.
• Create something that “a small number of people want a large amount”.
• The initial customer should initially be a single human, not an enterprise. While it may be an enterprise in the future, the first delivery channel should be via solving a unique and specific problem for someone.
• In order to do this, keep a list of stuff that annoys you, stuff that irritates you… Use it as fuel for the company.
• As the founder, you should use the product all the time.
• The problem should be easy for the founder to solve.
• Consistency is the greatest predictor of success.
• Execution wins 99% of the time, and persistence wins all of the time. 
• You will be able to make headway and really push the ball forward because the project is fresh in mind. 
• An unscalable process can become a service-based business, which can later be productized. Service co’s are easier to brute-force into existence.
• The activation energy of a service co. is much much lower than a product co. 
• Remember, users have other important stuff to think about besides your co.
• This can be done via a niche community that you are in some way a part of. If you’re not part of any special-interest groups, find one on reddit, twitter, or facebook groups from which to create a spark of interest. 
• Get the MVP in front of users ASAP. Leverage ChatGPT. Today is a unique and rare time with this new technology.
• Think of your initial version not as a product, but as a trick for getting users to start talking to you after they initial icebreaker. The MVP is just a way to have those 2nd level conversations with users.
• Use a medium that lets you work fast and doesn’t require much commitment up front… such as spreadsheets, notion, performing a service, typeform, stripe, email, airtable, google sheets, convert kit, etc. Lookup “email first startups” for more ideas
• Be careful if you charge for the core component… you may charge for add ons.
• Use the scientific method to formulate hypotheses about the “killer feature” in the product.
• Conversations with users are your way of testing the hypothesis.
• Even if the project itself is a failure, you’ll still be better from it.
• You need at least one reference-able customer and sale. This will help with future projects and customer acquisition.
• Could even write about “following the PG Approach”… basically just following Paul Graham’s advice that he shared on building a startup.
• Refer to the “micro-saas” movement on making modest but adequate stream of money. 
• Pick a name that you buy the .com of.

Anti-advice: follies to avoid

• Avoid risk & ruin.
• Avoid anything that feels scammy or incurs undue financial, regulatory, or compliance risk.
• Avoid creating a company that relies on yourself or another’s “personal brand”.
• Don’t build something that is bad for people.
• Don’t try to build a marketplace, and definitely don’t try to build a 2-sided marketplace.
• Don’t worry about competition.

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Paul Graham’s Startup Advice for the Lazy

Paul graham is a renowned programmer and wildly successful venture capitalist. he also happens to be a talented writer. if you’re short on time, i’ve cropped the most important pieces from my favorite essays of his below..

Paul Graham is a renowned programmer and wildly successful venture capitalist. He also happens to be a talented writer.

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I highly recommend you stop reading this and just go read his actual essays , but if you’re short on time, I’ve cropped the most important pieces from my favorite essays below.

Startups in 13 Sentences

1. Pick good cofounders

2. Launch fast

3. Let your idea evolve (most ideas appear in implementation)

4. Understand your users (many successful startups make something the founders needed)

5. Better to make a few users love you than a lot ambivalent

6. Offer surprisingly good customer service

7. You make what you measure (measuring something has an uncanny tendency to improve it)

8. Spend little

9. Get ramen profitable (just enough to pay the founders’ living expenses)

10. Avoid distractions (the worst type are those that pay money like day jobs and consulting)

11. Don’t get demoralized

12. Don’t give up

13. Deals fall through

Organic Startup Ideas

– The best way to come up with startup ideas is to ask yourself the question: what do you wish someone would make for you?

– If you want to come up with organic startup ideas, I’d encourage you to focus more on the idea part and less on the startup part. Just fix things that seem broken, regardless of whether it seems like the problem is important enough to build a company on. If you keep pursuing such threads it would be hard not to end up making something of value to a lot of people, and when you do, surprise, you’ve got a company.

– Don’t be discouraged if what you produce initially is something other people dismiss as a toy. In fact, that’s a good sign. That’s probably why everyone else has been over- looking the idea.

– There’s nothing more valuable than an unmet need that is just becoming fixable.

How to Get Startup Ideas

– The very best startup ideas tend to have three things in common: they’re something the founders themselves want, that they themselves can build, and that few others realize are worth doing.

– It sounds obvious to say you should only work on problems that exist. And yet by far the most common mistake startups make is to solve problems no one has.

– You can either build something a large number of people want a small amount, or something a small number of people want a large amount. Choose the latter.

– If Mark Zuckerberg had built something that could only ever have appealed to Harvard students, it would not have been a good startup idea. Facebook was a good idea because it started with a small market there was a fast path out of. Colleges are similar enough that if you build a Facebook that works at Harvard, it will work at any college.

– It’s even better when you’re both a programmer and the target user, because then the cycle of generating new versions and testing them on users can happen inside one head.

– You’re doubly likely to find good problems in another domain: (a) the inhabitants of that domain are not as likely as software people to have already solved their problems with software, and (b) since you come into the new domain totally ignorant, you don’t even know what the status quo is to take it for granted.

– It’s exceptionally rare for startups to be killed by competitors — so rare that you can almost discount the possibility. If you have something that no competitor does and that some subset of users urgently need, you have a beachhead.

– A crowded market is actually a good sign, because it means both that there’s demand and that none of the existing solutions are good enough.

Do Things that Don’t Scale

– The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all startups have to. You can’t wait for users to come to you. You have to go out and get them.

– We encourage every startup to measure their progress by weekly growth rate. If you have 100 users, you need to get 10 more next week to grow 10% a week. And while 110 may not seem much better than 100, if you keep growing at 10% a week you’ll be surprised how big the numbers get. After a year you’ll have 14,000 users, and after 2 years you’ll have 2 million.

– You’ll be doing different things when you’re acquiring users a thousand at a time, and growth has to slow down eventually. But if the market exists you can usually start by recruiting users manually and then gradually switch to less manual methods.

– How do you find users to recruit manually? If you build something to solve your own problems, then you only have to find your peers, which is usually straightforward. Otherwise you’ll have to make a more deliberate effort to locate the most promising vein of users. The usual way to do that is to get some initial set of users by doing a comparatively untargeted launch, and then to observe which kind seem most enthusiastic, and seek out more like them.

– Tim Cook doesn’t send you a hand-written note after you buy a laptop. He can’t. But you can. That’s one advantage of being small: you can provide a level of service no big company can.

– A consulting-like technique for recruiting initially lukewarm users is to use your software yourselves on their behalf. We did that at Viaweb. When we approached merchants asking if they wanted to use our software to make online stores, some said no, but they’d let us make one for them. Since we would do anything to get users, we did. We felt pretty lame at the time. Instead of organizing big strategic e-commerce partnerships, we were trying to sell luggage and pens and men’s shirts. But in retrospect it was exactly the right thing to do, because it taught us how it would feel to merchants to use our software. Sometimes the feedback loop was near instantaneous: in the middle of building some merchant’s site I’d find I needed a feature we didn’t have, so I’d spend a couple hours implementing it and then resume building the site.

Startup = Growth

– A startup is a company designed to grow fast. A good growth rate during YC is 5–7% a week. If you can hit 10% a week you’re doing exceptionally well. If you can only manage 1%, it’s a sign you haven’t yet figured out what you’re doing.

– The best thing to measure the growth rate of is revenue. The next best, for startups that aren’t charging initially, is active users.

– We usually advise startups to pick a growth rate they think they can hit, and then just try to hit it every week. The key word here is “just.” If they decide to grow at 7% a week and they hit that number, they’re successful for that week. There’s nothing more they need to do. But if they don’t hit it, they’ve failed in the only thing that mattered, and should be correspondingly alarmed.

The 18 Mistakes that Kill Startups

1. Single Founder You need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong.

2. Bad Location The kind of people you want to hire want to live there, supporting industries are there, and the people you run into in chance meetings are in the same business.

3. Marginal Niche You can only avoid competition by avoiding good ideas.

4. Derivative Idea Instead of copying Facebook, with some variation that the Facebook rightly ignored, look for ideas from the other direction. Instead of starting from companies and working back to the problems they solved, look for problems and imagine the company that might solve them.

5. Obstinacy Most successful startups end up doing something different than they originally intended. You have to be prepared to see the better idea when it arrives. Switching to a new idea every week will be equally fatal. Ask whether the ideas represent some kind of progression. If in each new idea you’re able to re-use most of what you built for the previous ones, then you’re probably in a process that converges. If you’re thinking about turning in some new direction and your users seem excited about it, it’s probably a good bet.

6. Hiring Bad Programmers Business guys can’t tell which are the good programmers.

7. Choosing the Wrong Platform How do you pick the right platforms? The usual way is to hire good programmers and let them choose. But there is a trick you could use if you’re not a programmer: visit a top computer science department and see what they use in research projects.

8. Slowness in Launching It’s only by bouncing your idea off users that you fully understand it.

9. Launching Too Early Think about the overall goal, then start by writing the smallest subset of it that does anything useful. If it’s a subset, you’ll have to write it anyway, so in the worst case you won’t be wasting your time. The early adopters you need to impress are fairly tolerant. They don’t expect a newly launched product to do everything; it just has to do something.

10. Having No Specific User in Mind You can’t build things users like without understanding them.

11. Raising Too Little Money If you take money from investors, you have to take enough to get to the next step. Usually you have to advance to a visibly higher level: if all you have is an idea, a working prototype; if you have a prototype, launching; if you’re launched, significant growth.

12. Spending Too Much The classic way to burn through cash is by hiring a lot of people. Don’t do it if you can avoid it, pay people with equity rather than salary, not just to save money, but because you want the kind of people who are committed enough to prefer that, and only hire people who are either going to write code or go out and get users, because those are the only things you need at first.

13. Raising Too Much Money Once you take a lot of money it gets harder to change direction. The more people you have, the more you stay pointed in the same direction.

14. Poor Investor Management You shouldn’t ignore them, because they may have useful insights. But neither should you let them run the company.

15. Sacrificing Users to (Supposed) Profit Because making something people want is so much harder than making money from it, you should leave business models for later.

16. Not Wanting to Get Your Hands Dirty If you’re going to attract users, you’ll probably have to get up from your computer and go find some.

17. Fights Between Founders We advise founders to vest so there will be an orderly way for people to quit. Most disputes are not due to the situation but the people. The people are the most important ingredient in a startup, so don’t compromise there.

18. A Half-Hearted Effort Most founders of failed startups don’t quit their day jobs, and most founders of successful ones do.

The Hardest Lessons for Startups to Learn

1. Release Early Get a version 1 out fast, then improve it based on users’ reactions. I don’t mean you should release something full of bugs, but that you should release something minimal. Users hate bugs, but they don’t seem to mind a minimal version 1, if there’s more coming soon.

2. Keep Pumping Out Features You should make your system better at least in some small way every day or two. Users love a site that’s constantly improving. They’ll like you even better when you improve in response to their comments, because customers are used to companies ignoring them.

3. Make Users Happy The most important is to explain, as concisely as possible, what the hell your site is about. The other thing I repeat is to give people everything you’ve got, right away. If you have something impressive, try to put it on the front page, because that’s the only one most visitors will see.

4. Fear the Right Things Way more startups hose themselves than get crushed by competitors. There are a lot of ways to do it, but the three main ones are internal disputes, inertia, and ignoring users.

5. Commitment Is a Self-Fulfilling Prophecy The most important quality in a startup founder is determination. You have to be the right kind of determined, though. You have to be determined, but flexible.

6. There Is Always Room The reason we don’t see the opportunities all around us is that we adjust to however things are, and assume that’s how things have to be.

7. Don’t Get Your Hopes Up It’s ok to be optimistic about what you can do, but assume the worst about machines and other people. When you hear someone say the words “we want to invest in you” or “we want to acquire you,” I want the following phrase to appear automatically in your head: don’t get your hopes up.

8. Speed, not Money Economically, a startup is best seen not as a way to get rich, but as a way to work faster. You have to make a living, and a startup is a way to get that done quickly, instead of letting it drag on through your whole life.

How to Convince Investors

– Convince yourself that your startup is worth investing in, and then when you explain this to investors they’ll believe you. And by convince yourself, I don’t mean play mind games with yourself to boost your confidence. I mean truly evaluate whether your startup is worth investing in.

– If it isn’t, don’t try to raise money. But if it is, you’ll be telling the truth when you tell investors it’s worth investing in, and they’ll sense that. You don’t have to be a smooth presenter if you understand something well and tell the truth about it.

– To evaluate whether your startup is worth investing in, you have to be a domain ex- pert. If you’re not a domain expert, you can be as convinced as you like about your idea, and it will seem to investors no more than an instance of the Dunning-Kruger effect. Which in fact it will usually be.

– And investors can tell fairly quickly whether you’re a domain expert by how well you answer their questions. Know everything about your market.

– Founders think of startups as ideas, but investors think of them as markets. If there are X number of customers who’d pay an average of $Y per year for what you’re making, then the total addressable market, or TAM, of your company is $XY. Investors don’t expect you to collect all that money, but it’s an upper bound on how big you can get.

– Your target market has to be big, and it also has to be capturable by you. But the market doesn’t have to be big yet, nor do you necessarily have to be in it yet. Indeed, it’s often better to start in a small market that will either turn into a big one or from which you can move into a big one.

How to Present to Investors

1. Explain what you’re doing Say what you’re doing as soon as possible, preferably in the first sentence.

2. Get rapidly to demo A demo explains what you’ve made more effectively than any verbal description.

3. Better a narrow description than a vague one Your primary goal is not to describe everything your system might one day become, but simply to convince investors you’re worth talking to further.

4. Don’t talk and drive Have one person talk while another uses the computer. As long as you’re standing near the audience and looking at them, politeness (and habit) compel them to pay attention to you.

5. Don’t talk about secondary matters at length If you only have a few minutes, spend them explaining what your product does and why it’s great.

6. Don’t get too deeply in to business models That’s not what smart investors care about in a brief presentation and any business model you have at this point is probably wrong anyway.

7. Talk slowly and clearly at the audience If you feel you’re speaking too slowly, you’re speaking at about the right speed.

8. Have one person talk Startups often want to show that all the founders are equal partners. This is a good instinct; investors dislike unbalanced teams. But trying to show it by partitioning the presentation is going too far. It’s distracting.

9. Seem confident I mean show, not tell. Never say “we’re passionate” or “our product is great.” If you’ve truly made something good, you’re doing investors a favor by telling them about it.

10. Don’t try to seem more than you are All you need to convince them of is that you’re smart and that you’re onto something good. If you try too hard to conceal your rawness — by trying to seem corporate, or pretending to know about stuff you don’t — you may just conceal your talent. They’re probably better at detecting bullshit than you are at producing it.

11. Don’t put too many words on slides When there are a lot of words on a slide, people just skip reading it. Don’t read your slides.

12. Specific numbers are good If you have any kind of data, however preliminary, tell the audience. Numbers stick in people’s heads. If you can claim that the median visitor generates 12 page views, that’s great. But don’t give them more than four or five numbers, and only give them numbers specific to you. You don’t need to tell them the size of the market you’re in.

13. Tell stories about users It’s good if you can talk about problems specific users have and how you solve them. The best stories about user needs are about your own. The next best thing is to talk about the needs of people you know personally, like your friends or siblings.

14. Make a soundbite stick in their heads In the startup world, they’re usually “the x of y.”

Stelios Constantinides is a UX Designer/Engineer at Truth Labs. You can follow him on Twitter @stothelios .

• SEE ALSO : What Melinda French Gates’s Philanthropy Could Look Like Post-Gates Foundation

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Ideas for startups, how to present to investors, a student's guide to startups, how not to die, a way to detect bias, do things that don't scale, crazy new ideas.

Startup Jobs Today Mean Networking With Tomorrow's Industry Leaders, Says Paul Graham: 'In Ten Years They'll Be Running Everything, Even If The Startup Tanks'

Paul Graham , the renowned entrepreneur and co-founder of Y Combinator , has voiced his opinion on why it’s more beneficial to work for a startup than a large corporation, even if the startup doesn’t succeed.

What Happened : Graham recently shared his thoughts on the matter on X. He believes that the connections made while working at a startup can lead to future success, even if the startup fails. “In ten years they’ll be running everything,” Graham wrote, referring to startup employees.

He acknowledged that working for big companies might be perceived as “safer,” but the potential for future success through startup connections is worth the risk. Graham’s advice has sparked a debate, particularly regarding the tradeoffs between high salaries at big tech companies and potentially lucrative stock options at startups.

Despite the potential for mental health issues and a lack of work-life balance at startups, Graham’s advice has resonated with many. Users on X, where Graham often shares career advice, have expressed their support for his views, according to a Business Insider report.

See Also: Steve Jobs Turned Around Apple’s Fortunes 27 Years Ago, Not By Making Mac Better Than Windows, But By Using This Technique Nike Is Known For

Why It Matters : Graham’s advice comes at a time when the tech industry is experiencing significant changes. His stance on the benefits of working for a startup aligns with the shifting attitudes toward work and career paths. This advice also complements recent industry insights, such as Amazon CEO Andy Jassy ‘s identification of the most crucial skill for success, indicating a growing emphasis on entrepreneurial thinking and adaptability in the workplace.

Additionally, Graham’s advice may resonate with recent graduates, as Steve Jobs ‘ ex-intern shared an investment tip with new graduates, emphasizing the value of taking risks and pursuing unconventional paths.

This advice also aligns with Elon Musk ‘s recent reflections on the craftsmanship and dedication required for success, highlighting the importance of perseverance and adaptability in the tech industry.

Read Next: More Classified Documents Reportedly Recovered From Trump’s Mar-A-Lago Bedroom — Judge Expresses Disbelief: ‘No Excuse Is Provided’

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

This article Startup Jobs Today Mean Networking With Tomorrow's Industry Leaders, Says Paul Graham: 'In Ten Years They'll Be Running Everything, Even If The Startup Tanks' originally appeared on Benzinga.com .

Western fighters in Ukraine are getting killed because they assumed the war would be easy, says a US veteran who fought there

• A US veteran who fought in Ukraine said many Western fighters assumed it would be easy.
• He said some "treat it almost like it's a vacation, and they're not really expecting to die."
• Many foreigners won't accept that their training hasn't prepared them for this war, he said. 

Some Western fighters who joined the war in Ukraine have been killed because they assumed the fight would be easy, a US veteran who fought in Ukraine told Business Insider.

The veteran, who spoke on the condition of anonymity, said a lot of foreign veterans who came to Ukraine to fight against Russia's invasion had been used to fighting at an advantage and struggled to adapt to the conditions there, where they were often outmanned and outgunned .

"A lot of Westerners that come to Ukraine, they want to be heroes," he said. "I just kept seeing dudes that would go out to Ukraine, and they treat it almost like it's a vacation, and they're not really expecting to die."

He said he had the same mentality when he first started fighting there. But as the war progressed, he came to understand how risky it was. "I was expecting to die because that's just the type of mentality that I fucking had, and I was OK with it," he said.

The veteran joined the fight when Russia's full-scale invasion began in February 2022 and left Ukraine last December. He fought in some of the deadliest areas, including Kharkiv and Bakhmut , and served as a combat medic for his unit, helping injured comrades.

He said he previously fought in Iraq as a contractor after he left the US military. "The tempo is a lot higher in Ukraine," he said.

A different type of war

He explained that it was harder to find places to stay safe in Ukraine, where more drones are being used than in any conflict in history, and artillery and long-range weapons are common.

He said that even miles behind the front lines, "you can still get hit by a fucking rocket out there." If you're on a base in the Middle East, you're "relatively safe."

Other US veterans in Ukraine have said the same thing, describing the combat in Ukraine as more intense.

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Another soldier, who uses the call sign Jackie, fought in Afghanistan and Iraq and previously told BI that the fighting in the eastern city of Bakhmut offered no place to stop and rest, unlike previous conflicts he'd been part of.

Both men also compared the war in Ukraine to World War I , where trenches and unrelenting artillery fire defined the fighting.

The veteran said that Western fighters in Ukraine need to adapt to those conditions if they hope to survive.

"You have to be willing to relearn everything that you've been taught, which is, I think, one of the reasons why some of the Ukrainian soldiers are doing so well out there, because they don't have any base where they've been taught," he said.

"Meanwhile, a lot of the Westerners, they already have a set idea about how things should be and everything, and it's just not that way out in Ukraine."

He said foreign fighters need "a willingness to learn and a willingness to give up everything."

Some members of the military and experts have said that the NATO-style training given to Ukrainian soldiers has not served them well in this war . Western militaries training Ukrainians have adapted their practices as they learn from the soldiers who have real-world experience against Russia's military.

Foreign fighters coming to Ukraine

Many of the foreign fighters in Ukraine had previous combat experience with the US military, though some had no experience. Others have said they had military experience but were lying, he said.

It's unclear how many foreign fighters signed up for the war in Ukraine or have been killed there. Ukraine founded its International Legion in 2022, which allowed fighters from other countries to join the war effort, though not all foreign soldiers are part of the legion.

Some units in Ukraine are made up entirely of foreign veterans , and many of them have said they were inspired to fight global injustice and defend democracy in Ukraine.

But other fighters have said that some foreigners joined the war looking for adventure or trying to escape problems at home.

No matter the reason, many foreign fighters have been killed, as Business Insider's Cameron Manley previously reported , with some international survivors saying they were used as a "sacrificial unit."

Watch: Drone footage shows thousands of Russians fleeing Putin's draft to fight in Ukraine

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