The Aha Moments That Made Paul Graham's Y Combinator Possible | Hacker News Reader

The Aha Moments That Made Paul Graham's Y Combinator Possible

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95 pointsahallerberg52 comments

Skimming this, I noticed a few mistakes.

I was 30, not 31.

My degree is in CS, not computer engineering, which is a hybrid of CS and EE.

We were already working on another company when we decided to work on ecommerce. We were making software to generate web sites for commercial art galleries (who didn't want web sites). So we didn't suddenly decide to write software to make stores. It was more a question of switching to a market that wanted what we could make.

Robert's apartment was not in NYC. I was the one who lived in NYC, and I was visiting him in Cambridge.

I didn't wake up with a specific sentence in my head. I just woke up with the idea that we might be able to control the software on the server by clicking on links.

It's an overstatement to say that the idea of Viaweb was too strong to fail. We came close to failing several times. It is true though that the best thing we had going for us was the quality of the software (rather than, say, marketing, or connections).

We weren't the only ones "insane enough" to make web-based software. At least one of our competitors did. It was a big help though that our most dangerous competitor took a long time to grasp the idea.

The story about the origins of YC omits Jessica. We decided to start it one night while we were walking back from dinner in Harvard Square (http://ycombinator.com/start.html).

Robert never devoted his time exclusively to YC. Jessica and I did, but he and Trevor have always done it part time.

As far as I know, no one has ever tried to put a valuation on YC. You could value our current assets fairly precisely, but that would come to less than 500m.

Skimming this, I noticed a few mistakes.

Also, the story started a little too late for me. I would have loved to have heard about pg's earlier inspiration...I often wonder if he drew it from the same places as me: the classrooms of Doc Shultz, John Drumm, Adrienne Kapisak, Laura Mikesell, and Linda Sproull, and of course the computer lab and chess club at Gateway High School. I wonder how he ended up in computers instead of history, art, or literature. Funny how time flies. We've both come a long way since Monroeville, Pa.

Perhaps a future blog post?

I did write about that once: http://paulgraham.com/heroes.html

We were making software to generate web sites for commercial art galleries (who didn't want web sites).

Do you think this is where your affinity for people who might be pitching a bad idea but seem smart / have good work ethic comes from?

Yes, actually. I feel like one of our advantages is to understand how lame founders can seem initially and yet ultimately succeed, from having been there ourselves. Or more precisely, which dimensions it's ok to be lame on, and which it isn't.

If you had to fill out a YC application for ViaWeb back then when you initially had an idea and a working demo, how do you think you'd have fared?

For example, while it was very obvious that your team had high skill (given your academic credentials), you didn't have domain expertise in online commerce.

Would you have picked you? :)

That's a question we ask regularly.

We did have domain expertise of a sort: we were experts in generating web sites, which back then was a comparatively rare type of knowledge.

I'm pretty sure we would have invested in us, because we had a very clear thesis about what needed to be made, and ecommerce would have seemed a promising market.

Could you fill that out a bit more? What dimensions do you think are critical to have right, and which can you fix later (ie be lame at initially)?

You can be clueless about business and uncertain whether you want to start a company. You can't be lazy or stupid.

>generate web sites for commercial art galleries (who didn't want web sites).

Were you generating the sites in sort of a 3rd-party, no-connection way, or did they just want someone to create their sites for them?

There are a few details in this essay of him:

http://paulgraham.com/bronze.html

Besides the remarkable insight that went into Viaweb, which I think this article captures, the thing I most admire about what PG & RTM accomplished there is the hustling and knocking on doors they carried out to sell their application after developing it. Quite inspiring for modern-day B2B entrepreneurs I think...

ps. "You could value our current assets fairly precisely, but that would come to less than 500m." <--- elegantly understated; this is what success at the seed investing game looks like :)

"It's an overstatement to say that the idea of Viaweb was too strong to fail. We came close to failing several times." Sounds polite and down to earth but its very true. Google, Microsoft am sure they all had times when they came close to failing. That's the good thing about being successful. The hard times are forgotten by everyone (mostly the naysayers) else apart from the person/people who really felt them most thus making that success bitter sweet.

I've never had an article written about me or my products that didn't have some mistakes, I'm not sure why it's not standard practice to send a draft to the subject for fact checking...

I've had a few reporters send me quotes and excerpts for fact checking. They then proceeded to ignore my corrections, since their fabrications better matched the target narrative.

Once you're on the other side of the news, even a little bit, you begin to understand just how broken it really is.

I had the same experience on fact checking

As have I

Sometimes quotes are sent yes, but not the rest of the article. Usually the quotes are not off but the facts of the actual story.

> Unix, the open-source operating system

edit : what UNIX did you use ? Linux ?

freebsd.

I remember viaweb, or webgen as I think it was called at the time, I was at Pointcast then who were also skirting around Yahoo. Back then I am not sure there was much of a distinction between computer engineering and either of CS or double E. It seemed prudent in the 90's to also get a good grounding in the digital systems side of computer science because it was a time where knowledge of the hardware gave software a significant edge. Which this is still true in some areas today, for most people, concepts like byte alignment and endian'ness are irrelevant.

From what I remember there were quite a few making web based software, Hayden's Critical Path for example springs to mind, and of course Yahoo and Nutscrape (as it was fondly called by those unfortunate enough to have to work on it)

I am almost afraid to ask you this, but here it goes.

On the last few weeks/months before starting Viaweb, did you consider yourself a failure for being almost 30, well-educated but out of the formal career track, "poor" and unmarried? If so, was that the fuel behind your many amazing achievements later on?

No, not really. I'd written the two Lisp books, and people liked those. Not a lot of people, but they were people whose opinions I cared about. Actually Viaweb felt like more of a compromise than the way I'd been living before, because it was something I was doing mostly for money.

So, you finally had your first taste of startup success at age 34. And you started Y Combinator at 41.

Think your story, along with many others in the Valley (e.g. Jim Clark), goes to show that this is a long-term game, and it only gets better with age and experience.

My memory might be betraying me, but I do remember a lot of hype about how people would be able to visit 'virtual galleries'. That's how stuff like VRML was usually pitched, but people didn't actually know how the technology could be used. Which reminds me of the whole "housewives will be able to store recipes in their personal computer" thing.

That could have been pg's motivation. I could also be reading to much into it.

$500 million valuation?

YC could probably sell their stake in Dropbox alone for more than that.

I wonder. YC's initial stake is usually <10%, right? Dropbox got $1.2MM right after YCombinator, which to me suggests a high rate of dilution. So let's say YCombinator owns 5% of dropbox. Dropbox is probably worth slightly less than $6bn according to pg's comment that Dropbox + AirBnB are worth about $7.5b. That would value YC's stake in Dropbox at about $300MM.

Of course, this is just a guess-I have no idea how much Dropbox was diluted in their early funding rounds. Even so, Ycombinator's stake probably couldn't be worth more than $600MM if we assume Dropbox is worth $6bn.

I figured that much, but on the market I'm sure someone like Google/Apple/Microsoft would pay a premium to current valuation for 5% of Dropbox.

YC's stake is common stock. It was presumably somewhere between 2-7%, like is advertised for current YC companies, back then. I assume it got diluted a lot since then, as Dropbox has had multiple rounds of financing.

Dropbox is worth maybe $5b. I think YC's stake comes out to 1-2% after the rounds. So, off by an order of magnitude or so. Just based on published info about the distribution of YC companies and their value, it's probably more like $200mm total fund value. Given that money-in was say 300 x $20k, and maybe triple that to account for salaries and other overhead, say $20mm, it's a 10x return so far.

Which is pretty baller for a VC fund.

On the other hand, I suspect PG etc. could have created a single startup of their own worth >$300m x 2 (to account for dilution) and probably exited it, in the same amount of time.

They might have actually done that anyway. Like PG said, YC itself is worth ~ $500m when marked to market, and I imagine they get acquisition offers.

Was the book written with your involvement or without?

Robert interviewed me.

I think the moral of the story is clear: If you want to build a successful startup, you must first hate Windows.

Or rather, the best innovation doesn't come from love, but from hate.

"I hate writing Windows software." Builds the first web app.

That did make me laugh; however, I think there is some truth to it, in that it helps to dislike the standard way to do something in order to innovate.

After all, if you like the standard way, and practice it, what you are going to get is standard results - which are mostly average. Yes, there exist crazy creative innovations, but the vast majority of successful business are not new inventions - but rather, a better way to do something everyone is already doing. It's evolution -- sometimes a big step, but still, way more often evolution than revolution.

My mother used to wonder why I seemed so negative all the time. "I'm not being negative, I'm just figuring out all the stuff I have to fix." I expect I'll be on the other side of that conversation in a few years.

I think pg once said something along the lines of "Most startups fail, so you have to do something different from most to succeed." At the time, web software was definitely "something different."

"Robert Greene is the author of the international bestsellers The 48 Laws of Power, ...[list of books]. His highly anticipated fifth book, Mastery, examines the lives of great historical figures such as Charles Darwin, Mozart, Paul Graham, and Henry Ford and distills the traits and universal ingredients that made them masters. ...more filler..."

Wow, Darwin, Mozart, Graham and Ford. PG's head must be spinning. ;-)

Author of "The Art of Seduction", "The 50th Law (with rapper 50 Cent).

The lesson is simple--what constitutes true creativity is the openness and adaptability of our spirit. When we see or experience something we must be able to look at it from several angles, to see other possibilities beyond the obvious ones. We imagine that the objects around us can be used and co-opted for different purposes. We do not hold on to our original idea out of sheer stubbornness, or because our ego is tied up with its rightness. Instead, we move with what presents itself to us in the moment, exploring and exploiting different branches and contingencies. We thus manage to turn feathers into flying material. The difference then is not in some initial creative power of the brain, but in how we look at the world and the fluidity with which we can reframe what we see. Creativity and adaptability are inseparable.

What a huge load of bull (in the last paragraph) on an otherwise good story (albeit some inaccuracies) of how pg started YC.

What he did - he made a pipeline, same like Ford did with a car assembly line. But it not just that.

Usually there are very mediocre people who works at assembly line. The trick is that YC filters out the best people possible, like Google does.

This is why the odds of successful exit (one way or another) are much greater than on average. They don't need each project to turn out into Airbnb. More than one is enough.)

Everything else is second. It is a pipeline of people who motivate, control themselves and push themselves to the limits. This is the cheapest (but hardest) way to get work done.

> We do not hold on to our original idea out of sheer stubbornness, or because our ego is tied up with its rightness.

Sometimes sticking it out is what is needed. These days it is fashionable to "pivot" -- I believe that in most cases you've gotta to stick it out enough with the original idea to see where it takes you. The data only tells you what you want to measure. The best insights/pivot you'll get by following your @gut (or as PG did with his "aha" dream of converting into a web-based store)

Hustle, as a personality characteristic, sets top entrepreneurs apart from the pack. It's the one that really matters because those with hustle know how to pivot when a chance encounter arises. Although this particular word is avoided, Greene's description of PG reads much like his description of 50 Cent in The 50th Law.

Nice article but I think it over-emphasizes hating windows a little too much and fails to explicitly make the more important point, which Greene did in this Mixergy interview:

"Robert: Well, the other person that I’ve interviewed . . . I’ve interviewed five so far. I’ve got about three or four more to go. It was a gentlemen named Paul Graham. I don’t know if you’re familiar with him.

Andrew: Y Combinator.

Robert: Yes, and Hacker News, yes. He’s really brilliant. So, one of the things I’m talking about in the book is the power of being a non-conformist, and it comes to what we were talking about earlier about your life’s task that you’re unique. There’s something different about you. When you find it, there’s power in that uniqueness. It’s almost like Harry Potter or something. When you find what makes that what it is about you, you’ve got this little diamond that’s going to give you power.

So, Paul Graham, what I liked about him was he’s always been a complete non-conformist and has gotten away with it, not because his parents had money or he was privileged, but because he didn’t care and he took risks and he just followed what he wanted to do. And that’s sort of the end of this book. That’s like the ultimate thing.

So, when he first started out, he didn’t really want to get into business, but he needed to make money because he was living in a really crappy apartment in New York. He came up with this other friend who was a great hacker. His name eludes me right now. You might know his name, and they came up with Viaweb, basically, because he was so good at this one code which name also eludes me that he writes in.

So, he kind of backs into being a successful businessman, and he doesn’t really care. Then, when Yahoo buys out Viaweb, he doesn’t suddenly try and morph into a conventional businessman working for Yahoo. He quits after a year. He becomes a writer. He writes articles that create a great following, and then he kind of backs into Y Combinator, which is a brilliant business model, I think, for the future for entrepreneurs, for tech startups.

But he doesn’t give a damn about what other people think. He doesn’t follow what other people do. He does what he thinks is right for himself, and I just think it’s a brilliant formula. I’ll be more explicit in the book and make it more, something you can understand. But that’s sort of the gist of it."

(Both audio/video and full text transcript can be found here: http://mixergy.com/robert-greene-power-interview/)

He definitely goes more into that in the book. Robert tells the stories of the masters from a couple different angles, I think this is just one of the more interesting ones.

Why the Y Combinator model don't work/exist in other countries? If this model spread to other countries it will be awesome, imagine the number of good ideas dying, when they just need a push.

Culture, people, experience, business environment, lack of year-round shorts weather, ....

It does, TechStars in particular has a huge number of affiliates around the world.

In fairness, the TechStars model isn't quite the same model.

For instance, YC rather explicitly doesn't provide shared office spaces. The shared office space of a TechStars location is a large startup community galvanizer in the cities where TechStars has set up shop - and partially offsets the need to be in the Valley for those companies.

There's no question that TechStars is tweaking the YC model subtilely in its attempts to get global outreach. (This is a good thing, the world could use more experimentation.)

>People sometimes think they could improve the startup scene in their town by starting something like Y Combinator there, but in fact it will have near zero effect http://www.paulgraham.com/maybe.html

Y Combinator's first batch was in Boston, this essay explain why being in Silicon Valley in important and why it's very difficult to replicate.

StartMate in Sydney has produced some pretty awesome companies. They are worth checking out.

It seems the author has already updated the article with edits based on PG's comments in this thread.

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