Ask HN: Are Paul Graham's Classic Startup Essays Outdated?
Updates needed on Paul Graham's startup essays?
The biggest change I’ve seen is how startups are being seen as “risk free”. At my first startup, I was one of the early employees and I had to convince and cajole new grads to join a startup. Everyone wanted to join big tech co. for the job security.
That’s changed now. New grads I’ve hired don’t see a startup as a risk event anymore, but rather, a normal career move.
It also used to be that founders would forego a salary and early employees would assume they would get paid much less than a regular job. Founders were also driven to protect their equity share and would dread dilution.
Of late, I’ve seen founders very eager to secure fat salaries and to get to liquidity events as fast as possible. The earliest startups I worked with, the founders would fret for days about bringing a VC onboard since that meant diluting their holding. Now, founders are driven to raise funding and sell some of their holdings to safeguard their future.
I say all of this without judgment or bias - I truly believe your first priority should be to secure your family’s financial future.
I just feel that the startup world is awash in so much funding (at least before 2022) that the riskiness and “courage” associated with startups - something most early startup essays would talk about endlessly - have been largely negated.
Like instead of living in a loft built in an abandoned factory in an obscure part of town, buying a new-build condo with exposed vents and some brick on one of the walls.
A lot of startups are just outsourced corporate innovation, or a VC bet on the founders, more like the investors hiring someone for a role than an organic "invention in the garage". Not always true of course, but a shift overall
Maybe half of what PG said is out of date, but a lot of that is because he wrote about a fundamentally different kind of startup. I think those stillexist, just not at YC any more.
I would say I'm saddened but ultimately VC money far outpaced the small minority of people who can build things.
But oh well, I'm not a US grad coming out of MIT or whatever those kids seem to have
* https://finance.yahoo.com/news/thiel-foundation-announces-ne...
On founder salaries, the days of ramen garage bootstrapping seem behind us. To be able to even live in these high cost Startup hubs cities/countries, needs higher salaries that is used to in the 90s and early 2000s. I'm not talking about crazy founder salary asks, which I have seen (pre-seed co-founders asking for $130k from their investors!), but even taking a "cut" still puts you in 80-100k range. If folks have families, it's a tough ask to go lower. Founders not cutting their personal finances to the bone, I think is fine, and I think it's a good thing the expectation is mostly gone that you have to somehow prove your commitment to investors or whoever by how broke you can go. It is quite sadistic.
I think the bigger issue is startups being seen as "risk free" and that is totally a problem. Not because we want everyone to fear for their life each day the come to work, or because we want to scare people off from joining. It's because it messes up the incentive structure and misalignes people. Startups need people who have, taken all the info in, are aware of the risks, and dive in head first anyway. Because they are committed to the mission/idea, want to just do something they find cool, or even because they want to roll the dice and strike it rich...whatever the reason. This is not to exclude people with lower risk tolerance, or who _need_ to make higher cash comp to meet their commitments...that's fine, just join later on at a point where the risk meets your tolerance. It just does not work if the latter type of person joins early.
To give a recent example. I was reading through one of those layoff lists that come out of folks who are looking for new roles post a company layoff event. I recognised a name. Turns out it was my former account manager at a very big (and safe) enterprise tech company we buy from. This person had moved to, at the time, a decacorn startup, had been there 7mo and was now out the door. This startup was a rocketship, and no one was really expecting anything to go wrong. But like you said, they are never "risk free", and this macro economic shock hit their trajectory and cuts were made. Unfortunately they hit this person. I don't know if they made the move to a startup with the risks in mind, or if they just saw it as a move to (probably) higher pay and a better "lifestyle".
There was just way too much money and VCs didn’t know what to do with it.
Prime example, of course, would be the entire crypto/web3 industry.
There is no “mission” from a VC backed startup except to see an “exit”, believe otherwise at your own financial peril.
This summarizes my disdain for tech. Most startups seem focused on addressable audience size rather than any form of utility. That is symptomatic of VC funding.
Ironically, of all the startups I’ve worked in/consulted, the most profitable ones (actual profits, not paper profits) were started by non-obvious founders without significant funding or credentials.
Tech funding is becoming a little like the old boys club where ex-FAANG/Ivy VCs fund other ex-FAANG/Ivy founders.
Solving a small problem for a billion people will produce more utility (and therefore value) than solving a big problem for 10 people (obviously there are specific tens of people for whom this would be false).
FWIW though pretty much all startup advice, and YC’s in particular, is to solve the big thing for 10 people before scaling up.
Take social media as an example: It's essentially "attention arbitrage." The raw material is our attention, and the output is their profit. They've built an economic engine by piping excess attention directly to the highest bidder.
Also, can you really compare utility in terms of scale? Is it better to improve 1,000,000 lives 50% or 1,000,000,000 lives 1%?
Even looking at the last 10 years vs. the 10 years before that, the emphasis has already started to shift back the power to the celebrity content creator over the nerdy engineering tech creator. Before Web 2.0 really took off, websites and apps were all the rage because it was mostly nerds and other early adopters that could monopolize the power of the internet. Now the playing field has been leveled again, and it's those with strong personalities, marketing skills and other digital content production skills who have been making the big bucks. Mr. Beast's youtube channel was offered a $1 billion buyout. Engineers weren't thought of very highly before the personal computer revolution, and the money and power was all with the celebrities instead. I think the last 30 years was mostly an anomaly, but now that the internet is more democratized, the money and power will be returning to the celebrity content creator.
1: As a founder it is more important to be competent and productive than to seem competent and productive.
2: It is an advantage to trust your own competence and ignore common practices.
3: It is better to build something for real users than for imaginary users.
4: A great product is more valuable than great marketing.
They still ring true with me. But maybe I am biased and just remember the thesis that I agree with.
I think that is why PG brings these points up. It is what usually makes things go wrong. It is against human nature to follow these points. People want to impress and fit in. They don't want to sit and build a little thing for just one user.
Those that impress the most are those that fit the least.
Are they marketing a product or the company? If they're selling the company I like to stay away. Even places I've worked with legitimate product engineering kinda suck when management is distracted by prospective investors or buyers. It's a misalignment of priorities between the top and bottom.
There are classics like "Maker's Schedule, Manager's Schedule" which are absolutely timeless.
Like I was hoping for people who want to leverage AI to do some cool shit or solve some difficult problem in some industry. You know, something actually useful. I wanted to talk about my scheduling software, or discuss some challenges in industry I don’t know shit about.
Instead people were talking about their (yet another) copy of a copy of a wellness app..
Granted I’m fresh af to this game but I honestly felt so out of place. Nobody was talking tech and people were talking about their vacations to some exotic places and taking selfies. That’s fine, but nobody really seemed like an engineer or solver minded person.
It was honestly bizarre and kind of depressing. I felt like I had better tech and ideation focused discussions in my tiny city that I left to move to Bay Area.
I’m serious. 1980-2020 was the hype of an undertaped market that was personal computing. Anyone in a garage could do something revolutionary because anything was already better than nothing. Even if it didn’t respect GDPR and leaked PII accounts like a sieve. That’s always like that in the start of a Schumpeter economic cycle, same happened with cars in 1900.
Now, we’re in a consolidation phase.
Or are we still in an “invention” phase? AI maybe?
1980-2020 is just a massive drill down in interest rates, which basically means that for the last 40 years you were incentivized to progressively take on more and more risk and bet on growth.
If interest rates go back down in the near future, then DCF math will keep startups cool. If not, and we transition to a regime where you have maybe 4% interest rates as a floor, then startups as a culture will become outdated.
I think AI will ultimately be the driver of consolidation. The innovation in software of the last 30 years was, as you said, from the ability of anyone with a laptop to dream up a big new idea. But with state of the art AI models costing prohibitive millions to train and deploy, the power has returned to the hands of capital.
AI by itself doesn't achieve that in my book, voice assistants maybe, but I'm sceptical that they don't just move usage around. Suppose that's why people invest into stuff like VR/AR and neural interfaces, hoping those are the next big things that massively expand computer usage. Though computers are already being used quite massively.
That said, it might also be the case that incumbents have more to benefit than startups, in a world that rewards access to large proprietary data sets.
Most people don't like regulation but we can't keep on producing insecure junk without Governments starting to require some kind of formal certification. It is never perfect as anyone in a regulated industry knows, but it has to be better than nothing.
For example, how many companies use applications written 30 years with no concern for security and are never forced to retire it (or prove that it is secure)? How many companies don't even have visibility of the 1000s of web servers that have been accumulated over the years of merges and divisions etc?
One short story about how I got a rude email one morning at work saying we need to change all our connection strings in production (internal applications) because machinename1234.corporation.lan doesn't work anymore so they moved it to a new machine machinename1235.corporation.lan
I still don't know how someone at one of the top five Internet providers in the nation thought it was acceptable to do that instead of renaming the new machine to the old one. It isn't like we were pinning certificates or something fancy. I am pretty sure the certificates were self signed, which is ok for on prem.
> How many companies don't even have visibility of the 1000s of web servers that have been accumulated over the years of merges and divisions etc?
I wish we had thousands of web servers. At one place I worked at it was the same set of few windows server boxes for everyone and everyone keeps tripping on one another's toes leading people to say well QA and preproduction are broken it will be fine once we are on production.
I think about this a lot in the context of open source. We’ve had a ton of great things happen from everyone being able to share code but there is a valid concern about vulnerabilities in code which has been orphaned or was written by someone who wasn’t familiar with secure coding practices. For example, businesses have seen billions of dollars in benefit from WordPress based on the cost vs. functionality / productivity of commercial CMS applications but WP plugins are a famous source of exploits and many of them are written by people who don’t even have the time or skills to secure them if they did. It feels like there should be some way to change that but it’s not clear whether any of the efforts to fund open source will get enough traction.
That belief is outdated.
[0] - https://news.ycombinator.com/item?id=34673325
EDIT: I'd like to add some links to some comments that had done a good job of listing some of the worthy information to revisit from Paul's essays.
If the era of cheap money is truly at an end, then the whole edifice must be reconsidered.
It’s important to remember the economy is cyclical. We’re in a funding drought. Probably for another year or so.
We’re at one extreme at the moment. Things will eventually move back to usual once interest rates come down. I’d say in about a year.
A lot of VC activity relies on using borrowed money. It’s very similar to how no one wants to buy a house right now because rates are too high, the same thing is causing investors to leverage their assets much less.
Once interest rates move back to normal levels things will pick up again.
Ideas for startups often come from solving your own problems.
A good startup idea should have at least one of three things: it's something you're passionate about, it solves a problem you have, or it's something you're good at.
The best way to predict the future is to build it.
Move fast and break things.
A startup is a company designed to grow fast.
A startup is a company that is confused about what its product is.
The key to growing a startup is to learn as fast as possible.
The ideal size for a startup team is around three to five people.
The best startups are often started by people who are still in school or in their early 20s.
Don't worry about competition. Worry about creating something that people love.
Make something people want.
A startup is a company that is trying to answer a question nobody knows the answer to.
The most important quality for a startup CEO is determination.
A startup is a company that is being run by a small group of people who are trying to discover how to build a scalable business.
To be a successful startup founder, you need to be an expert in something.
A startup is a company that is trying to create something new under conditions of extreme uncertainty.
The goal of a startup is to figure out the right thing to build—the thing customers want and will pay for—as quickly as possible.
If you're not embarrassed by the first version of your product, you've launched too late.
Don't let your ideas be dragged down by the standard of what already exists.
Don't scale too soon.
Your job is to do what you do best and delegate the rest.
Don't take VC money until you have to.
If you want to start a startup, don't think too much. Just do it.
To be successful, a startup has to be run like a cult.
The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself.
The biggest mistake startups make is not making something people want.
Your first 10 users are more important than your next 10,000.
If you're going to start a startup, you should know from the beginning that it's going to be hard.
The best way to raise money for a startup is to not need it.
Has this ever held true though? Yes, in case of unicorns probably. But case of general survivability of new startups, doees age really have any say?
Is Beethoven's 5th outdated?
They’ve eaten good food, but they may or may not know anything about starting a business.
Paul Graham hasn’t started a company in several decades now. Just because he has proximity with a lot of people who have, doesn’t mean his advice is still sound.
He was competing with Perl shops, for crying out loud!
The scene has changed. A lot. Seek out lessons from success by yourself, directly. Ask local, search local, find the people successful near you in your industry and just ask them. Many will tell their tale over lunch, and then you’ve received personal, actionable advice for the price of a good meal.