Before the Startup
paulgraham.com
paulgraham.com
The bootstrapper crowd (Amy Hoy, patio11, etc) often level this as a criticism of VC-backed startups -- that they are a gameable system, a series of hurdles from accelerator to series A to series B to acquihire. Whereas (they say) bootstrapping isn't gameable, it relies on making something users want, and it teaches you to deal with raw reality head-on. [1]
Maybe they are only looking at a dysfunctional subset of VC-backed startups though? One common pattern seems to be that a person enters a particular field, notices that many people around them are unimpressive and focused on perception, "networking" and system-gaming -- and concludes that the field is corrupt.
But in actuality, they'd only seen the bottom tier of the field, and the higher tiers have more genuine talents who also despise bullshitters.[2]
[1] http://unicornfree.com/2012/why-blacksmiths-are-better-at-st...
[2] I'm thinking specifically of academia as another example of this pattern. Since bullshitters do manage to reach the higher tiers of both startups and academia, there's a genuine question as to whether the bullshitters will someday come to dominate both of these areas, and whether this has already happened. By definition, a field that has been taken over by bullshitters is not going to let you know that this has happened.
This is armchair quarterbacking, of course, I'm not an entrepreneur and do not pretend to be one. Patio11 has a lot of interesting and relevant things to say, but I would hate to live in a world where entrepreneurs only undertook ventures that could be bootstrapped for a reason that I'll frankly admit is selfish: throughout my career I've worked on very fascinating problems in either VC funded startups or companies that have began their life as such; I can't see a scenario where I would have been able to do this (or similar kind of work) in a bootstrapped product company. That's not to say there aren't other interesting problems that could be solved in a bootstrapped company, but my own area of focus -- distributed systems -- is almost by definition something that requires both infrastructure and up-front development (and, in general, is only something that should be used if there's a scalability or reliability problem to start with.)
You can't. That isn't a problem though. The 'bootstrapped versus capital-backed' dilemma is false. It's not a case of one being better than the other so much as a case of "the one that's best for the business and its founders". Often there won't be a choice - some businesses have zero chance of raising money before they start and some have zero chance of starting without raising capital first. The discussion is usually around whether or not the majority of SaaS startups need to raise money first rather than any business.
You can't — obviously. And folk like Amy Hoy @patio11 freely admit that.
The key word there though is "requires". I've encountered lots of companies that have spent silly amounts of money, often their investors money, because they've missed opportunities to validate their business model in cheaper ways. Either because they don't know how or they don't want to. Folk who are so focussed on the vision that their aiming for that they fail to look down as they walk over a cliff.
To stereotype slightly I'd say that folk with a dev background are more likely to go that route than not — since the business / marketing / user research end of the skill spectrum that can help with that stuff is less familiar to them.
Nothing against VC funding, and it's absolutely necessary for some companies. It's just that the majority of folk that I see trying for it are doing so before it is actually required. Either because they're missing ways they can continue more economically because they lack the skills, or they hope that the (lack of) positive feedback that they're getting so far will be solved by money.
As an armchair quarterback I'm a bit surprised about what you've said about "folks with a dev background" (if I didn't focus on distributed systems, I'd likely focus on development tools/services -- and there are tons of bootstrapped companies in that area), but I'll take your word for it.
What I meant, and expressed poorly, was that dev-ish folk tend to not have some of practices in their toolbox that you can use to validate cheaply (e.g. by knowing how to assess markets well, or knowing how to interview potential customers in a non-directive way, or indeed the ability to talk to customers at all, etc).
We also have a tendency to want to build things because, y'know, that's what we do ;-) We also tend to want to build things really, really well for that awesome future place where we have millions of users. So we over-engineer for where we are now, and the learning we need now.
Because of both of these issues I think folk with a dev background find themselves in a position where VC is the only route forward — when if they'd taken a different approach earlier on they could have continued bootstrapping and avoided VC money until later / forever.
Does that make sense?
First you bootstrap something less ambitious. Then you can use that money to start more R&D heavy companies.
Of course many natural-going ideas are also amenable to being bootstrapped (software development tools/services would probably be a good example), but key here is ideas that naturally arise from your area of expertise.
It's a plan that probably works for enterprise middleware, but for the majority of reality that is not covered by such a descriptor, it is significantly harder to find a path this way.
Unless you're an Oracle consultant on one end of the scale, or a WordPress theme designer on the other end, you're probably not going to be able to repeatably find lots of clients who want a little of your time and are willing to pay enough for you to work on the side.
A lot of clients want to hire consultants for full-time work, and they are frequently only looking for bodies to fill chairs. Finding a decent client that treats you with respect and understands they can't monopolize your time is hard, hard work.
So if your R&D effort is not related to your consulting--or your contract terms assign ownership of all work materials to the client--you'll just end up in the same situation as having a job.
I suspect the only reasonably repeatable path for early funding for big R&D efforts is through obtaining grants. Learn grant writing, or pay someone who does do grant writing (imagine the longest paper you wrote in college and quadruple it). There are a lot of research grants available, even for independent people not associated with accredited academic research environments. There are even grants for work in the arts.
I've spent the last two years doing freelance consulting. The money I've made was great, but I'm no closer now to starting a company than I was before. You should only do consulting if consulting is what you want to do.
Outside of America this is basically how you have to do it pre-traction.
You could say "I want to build colonies on Mars, I just need 10 Trillion in capital!" or you could say "I want to build colonies on Mars, how can I get there even though I only have 1 / 100,000th of the capital?
The same goes for all these startups that think they need 2 million or 10 million dollars to start. You need skills and $100 to start. Someone mentioned distributed systems as an "unbootstrapable product" which is total baloney. Start by identifying clients that would buy your product once it exists and help them distribute their systems. Build up your team and use your spare cycles to build out the features you think you're going to need but currently can't find anyone to pay you to build them.
If you are still hung up on Space X starting with $100m, let me ask you this. Say Elon had lost it all on Telsa and he was starting with a loan from one of his friends to start Space X. How small would the loan have to be for you to confidently say that Space X would never get people on Mars? To me, the size of the loan only dictates the speed of reaching the ultimate goal.
More importantly, the goal of SpaceX is fundamentally the colonization of Mars, and the idealized method to do that is a fully reusable interplanetary spacecraft. If SpaceX had tried to build that and only that from their start they would have rapidly ran out of money, even $100 million, and had little to show for it. Instead they bootstrapped their way toward acquiring the capability to design, build, and operate such things while also building a corporation capable of funding such operations. Initially they built a small orbital launch vehicle, just barely at the limit of market feasibility, using very conventional technologies and very conventional designs, applying innovation peace-meal where it made sense. Even then it took them several tries to get a launch vehicle that worked, and it wasn't even very competitive in the launch market. But it proved that SpaceX was capable of building launch vehicles, which enabled them to get grants and contracts to build a launch vehicle that was.
It wasn't a demo or a prototype, the Falcon 1 was a fully functional "MVP". And it wasn't investment funding that got them to the next stage, it was effectively pre-orders for the next generation of their product. Then you look at what they've done since, they've built iteratively, advancing toward their goal, but even now they still haven't gotten everything into place that they need. They're still working on partial reusability, still working on manned spacecraft, still working on clustered core staging, and so on. But even so they have viable products that are bringing in a lot of revenue, with new products coming online soon that will bring in even more revenue. They are still several iterations and many years away from their goal but by the time they get there they'll have the expertise, experience, and revenue to actually make it happen.
As with most endeavors, it's almost always easier and better to get to a big goal iteratively. That's how you build skill, it enables you to sell your earlier iterations to maintain revenue to keep your company alive, and each iteration provides lessons which inform the next and can reshape the grand idea you once had.
What about universities and government funded projects?
Are you also under the impression that most interesting R&D need significant funding?
I can't speak of "most interesting", I can only speak of what I've worked on :-)
It's hard but possible. Your team could do consulting on the side to pay for the R&D. A hardware company I am very familiar with did this for 2 years and skipped all seed funding, to build a highly complex and expensive hardware product. It was succesful.
In startup world, they get also eliminated quite rapidly as they will just fail. Success of any startups is not to raise funds but to get customers who will pay for value and for that bullshitters cannot trick the system.
if only this was true!!
Peer review doesn't work in science because nobody cares to review unknown or lesser known authors.
Or so I've heard. All of the administration at my university is of course irreproachable. (Hi boss!) But the stories my friends tell me... ;)
There ultimately is little freedom from bosses. Either your VC's are, or paying customers are.
I hear this line often, and I think it switches terms. I'm a bootstrapper. When I say I don't have a boss, I don't mean I don't have responsibilities. I have a ton of responsibilities – maybe more so than those with jobs. I can't easily take a 100% off vacation, for example.
But I don't have a boss. I can arrange things how I want. I could even blow off customer support entirely, if I felt like it. I'd make a bit less money, probably, but I'd still be fine.
And I've occasionaly "fired" whole categories of customers when I felt like stopping a certain activity. Couldn't do that to a boss.
Quitting is (to the extent the metaphor works at all) firing your employer, not your boss; these can sometimes be the same, but often your boss is, like you, an employee of your employer, not someone with whom you engage in a direct exchange that you can terminate.
If a line supervisor isn't given permission to terminate his subordinates' employment (because, e.g., that's reserved for a higher-level manager), but can quit, it would be wrong to say he can fire his employees. Likewise, it is wrong to say you can fire your boss unless you can terminate the boss's employment.
If the goal of your company is to grow as fast as possible, then the VC rocket ship approach seems like a no-brainer.
Many startup factories forget that the goal of a startup is to quit existing and become a business.
Depending on the type of product and market you're in funding can help.
For the first, or second time entrepreneur, there is a far more valuable lesson to learn than getting external validation in the form of investment: Learning to add value, and learning to build something of value at a small scale, as well as the associated business skills, before doing it at presumably a larger scale.
The VC rocketship can create as many distractions from finding something people want. I'm not against it, but glad I hesitated taking investment in my 20's, I'm a much more well rounded entrepreneur for it, and now as the opportunities are coming up, investment is around that much more, and secondary to finding the right fit with team, market, and product.
As you can tell, I think growth capital interests me more than getting funding to get a market. I think both are fine, I just find I respond better to grinding, hustling and being resourceful.
The latter requires more capital to expedite the ROI for the VC whereas the former is typically a much slower, organic process that may not reach an equivalent scale for 10+ years. I'm a firm proponent of bootstrapping and organic growth. After a few years of positive cashflow and growth you can walk into a commercial bank (gasp!) and setup revolving lines of credit or expansion capital to fund more growth.
commercial banks are incredibly hesitant to do this even if you've passed the magical 5 year mark. their commercials loans are underwritten by people who are extremely risk averse, and the "commercial bankers" at your local branch are basically the people who aren't good enough for investment banking i.e. the b-stringers who don't understand how a technology business works. they'll just say no. in fact, it's their job to say no. i have my doubts as to how much money they even make with their loans. most of their revenue comes from fees these days.
however - there are thousands of specialized finance firms who will gladly help you, because there is a massive hole in the middle of the money market for these kinds of funds. they will provide you with:
* revolving lines of credit
* commercial equipment leases
* straight up loans
* special insurance
* lots of other industry-specific stuff that a bank just doesn't even know exists
this entire industry has sprang up "overnight" in the past 10 years - the vast, vast majority of new businesses in america are bootstrapped (think restaurant, construction company, small accounting firm, small scale manufacturing/machining, software companies, etc). venture capital and large banks are not involved. this isn't their game. it's "main street".
these specialized firms generally specialize in an industry i.e. construction, technology, food service, etc. and will know at a glance if your business is healthy or not. and don't worry - they'll find you. they have a knack for swooping in at exactly the right time. they also will not require a personal guarantee, which is a huge leg up on the banks, who will make you sign at least 2 or 3 documents saying they own your life.
if you ask me, commercial banks are nearly useless for anything but checking accounts and wire transfers. they're run by morons, or at least people who don't give a damn about technology businesses, which is tantamount to being a moron in the 21st century.
second, what you're saying is so blindingly obvious that it doesn't even need to be said - startups do not fall into the category of traditional businesses with strong P&Ls and great balance sheets and constantly increasing margins, like a bank wants to see. most bootstrapped startups operate at break even, or can even dip into loss for a few months at a time. these are the companies that need the money.
this will immediately disqualify you for a bank loan. which is the original premise of this entire thread - the banks won't give you shit.
So as a bootstrapper are you still taking this approach past year 3 or 4? At a certain point you need to hone in on that repeatable / scalable business model and put up some numbers or fold.
If you're a couple years in and have bootstrapped past breakeven your funding options AND odds of survival are greatly improved- so why not orient around that outcome?
I'm not here to defend the absurd behavior and ignorance of commercial banks just pointing out that sometimes the game changes if you can afford to take a slower more incremental approach to growth than what is typically demanded by VC.
when the bank sees this, they will flip the fuck out. but someone with experience in your industry and a specific financial product designed to help you will know exactly what you're doing.
it's repeatable, it's scalable - however, it requires money to grow just like every other business. this isn't skating by on ultra thin margins with $50k in the bank - it's a business with significant cash that needs significantly more cash, and is willing to sacrifice margins in the short term to grow. and that's not what banks do (these days).
This is necessary but unfortunately not sufficient. You still have to do all the sales and marketing grunt work. It is amazingly hard to get people to pay money even if they love your product. Brutal and depressing.
I think this is one reason why geographic clusters of startups occur: You get a few people "living in the future" co-located and suddenly the "uncannily prescient" idea no longer just seem obvious to you, they seem obvious to everyone around you too, and everyone wants them now.
The future is here, it is just not evenly distributed -- William Gibson.
In Southern California right now we're living this with regard to Oculus / Virtual Reality.
Oculus being born here / the dev conference happening in LA / and the amount of devs that are playing w/the tech logcally feels like one of those times where we get exposed to Bay Area "newness" of a product.
And as a result, get to invent and problem-solve before the general population even has the consumer tech (which they'll probably first see in bestbuy via gear vr soon).
I think the internet, which sometimes serves as its own geographical place, can foster the same sort of clusters.
You can see that with bitcoin/blockchain communities, all kinds of inventive ideas coming out of the online communities there. It's a cluster of people who are living in a certain subset of the future already, and the community is centered online.
Which implies that a smart incubator would want its own online geography to cluster people living in the future. HN isn't quite that. I'm not sure exactly how it misses that target, but it does somehow.
Hmmmm.
I agree, but I think it's difficult to achieve this deliberately.
Which implies that a smart incubator would want its own online geography to cluster people living in the future. HN isn't quite that. I'm not sure exactly how it misses that target, but it does somehow.
There have been some attempts to do this (NReduce) but no outstanding systematic successes that I know of.
I think it's an interesting area.
Around the turn of the millennium, the brashness born of 1990's success transformed his writing from youthfully exuberant technical expertise [2] toward experienced practical advice [3]. In Before the Startup we meet up with PG again just as he walks back into the ring of the public light. His load has shifted, advice must be sage: consistent with the gestures of hands that have firmly held the tiger's tail twice. Yet, despite the years, PG's youthful earnestness remains intact.
Recently, because I've seen ViaWeb and HN trotted out as contemporary examples of successful uses of Lisp in business, I've wondered how much of Beating the Averages describes what really happened and how the older PG would ascribe the success of his first startup.
Was Lisp really the secret sauce? Would it have mattered if PG and Morris ground out updates in Perl? Will there be an immodest greybearded admission that, in hindsight, it really was the people?
Autobiography is not so much an author's way of gaming history, but rather gaming the business of history. And that, the gaming of "the business of x" is the central theme of Before the Startup. What Graham is arguing is that a person can't game their way into running a successful startup. He doesn't deny that a person can successfully game the business of startups...there are people who can sell Yelp for Dogs to investors sufficiently to purchase barker.com.
No longer YC's designated spokesmodel, PG is in the agora pitching eudaemonia, the not-as-seen-on-TV good life, to the youths of the valley. His life's example is not the celebrity brought about by business success. His advice is "stay earnest."
[1] yes.
[2] On Lisp
[3] Beating the Averages
Is PG seriously implying he doesn't know where college students got the idea that they should be founding startups instead, after spending the last ten years telling them to?
Not only that, but haven't the majority of the 'successful' founders in which he's invested either been in college or at least in their 20s?
Adjacent point: 99% of founders don't stick around with their companies for life like Mark Zuckerberg. That's an ideal scenario for a game-changing company. In the overwhelming majority of cases, you exit and move on.
The less it costs to start a company, the less you need the permission of investors to do it. So a lot of people will be able to start companies now who never could have before.
The most interesting subset may be those in their early twenties. I'm not so excited about founders who have everything investors want except intelligence, or everything except energy. The most promising group to be liberated by the new, lower threshold are those who have everything investors want except experience." - http://www.paulgraham.com/hiring.html
If PG has genuinely changed his mind in the face of new evidence, we should award him points for that. But he should also come out and admit it.
He does mention that there are certain things you can't do if you start a successful company at a young age, but to me the main point was that when you take on a startup you have to be completely invested, and if you're still in school it will be very hard to find time work on both the company and maintain your grades.
For the record, I do recall that YC changed their policy on this rather early-on its history (explicitly advising undergrads against applying) and pg has repeatedly told "Ask HN" posters on this site not to drop out of college.
This could be partially because 10 years ago, PG thought startups were undervalued in society and wanted to preach them as a valid alternative route to success. Now startups are the new Pogs, with everybody in Intro to CS wanting to be a part of their college's official startup program. So maybe now he thinks they're overvalued and wants college kids to know that even if they could reach that "The Social Network"-ian dream (which, by definition, a majority of them can't), it wouldn't be worth it and they should enjoy their carefree life a little more before they bite off more than they can chew.
Or, like brudgers said, maybe it's a sign of personal progression. The overactive young PG wanted people to live the obsessively fast lifestyle like he did, but now the older and wiser PG thinks it wouldn't have done him too much harm if he spent a couple of more years crashing in random hotels around Beijing. Certainly the more amusing of explanations, I guess.
I don't believe this is true. I think the startup ecosystem actually learned how to game "making something people want". After all, startups are companies, companies need to profit, and "making what people want" vs. "making what people will pay for" are similar, yet not perfectly aligned goals.
pg may be right that startups are "as impersonal as physics", but users aren't, and herein lies the trick. One of the most blatant ways of gaming the system is the exit-seeking, toilet-paper startup. It exploits the disconnect between "growth" and "making something users want". The algorithm works like this:
- find something people apparently "want"
- make a half-baked solution, maximize it for user-acquiring candies
- market the living hell out of it
- keep the growth until you can sell your startup or get acquihired
- kill the product; who cares about it, anyway? oh and don't forget to thank your users for the journey, you couldn't all share this awesome moment without their help.
I don't believe this is true. I think the startup ecosystem actually learned how to game "making something people want". After all, startups are companies, companies need to profit, and "making what people want" vs. "making what people will pay for" are similar, yet not perfectly aligned goals.
Found this while Googling for Quora's valuation: http://techcrunch.com/2014/04/09/quora-forever/
Take the case of Quora. Quora is a question-answering website. You type a question and a domain expert might answer it for you.
Quora's declared competitor is Wikipedia, a free site that not only doesn't make revenue, but loses so much money they have to ask for donations just to be broke.
Recently, Quora raised $80 million in new funding at a $900 million valuation. Their stated reason for taking the money was to postpone having to think about revenue.
Quora walked in to an investor meeting, stated these facts as plainly as I have, and walked out with a check for eighty million dollars.
That's the power of investor storytime.
So yeah. No one games anything here.
I mean, there are insurance and retail stocks that have billions in revenue, showing serious profit each quarter and their share price is half of Twitter's. But, to be fair, Twitter didn't 'growth hack', they did build something people wanted to use. But their exit (as of now) would have to be considered 'gaming the system'.
I think the most dramatic example of this (other than WhatsApp) is Snapchat.
Founders know they need growth, so they ask themselves "How do we...", and "Hire a Growth Hacker!" is an easy response. It sounds like a way to game the system. After all, growth is right there in the job title, and we all know hackers game systems.
The appeal of a 'hacker' for growth is that it sounds like it solves the hard work of growing by building something people like. We'll just game around it with our hacker!
I don't think that's the conscious intent, but I do think it's the subconscious intent. And both why the term is appealing to founders and why it bugs the hell out of me. It's the subliminal implications of gaming the system.
But you're right. Growth is hard, and if you're a hacker at heart, focused on developing your idea/product, someone specialized in "all that murky businessy client-getting stuff" is godsend. You don't want to distract yourself with it, you have better things to do.
I also think that it can sometimes be a way to out-source conscience. You pay the growth hacker to do "the magic", and you don't care what it is that he is actually doing. You can hire one that will do black-hat SEO and abuse social networks without feeling any guilt, by simple virtue of not thinking about it.
The component of entrepreneurship that really matters is domain expertise. The way to become Larry Page was to become an expert on search. And the way to become an expert on search was to be driven by genuine curiosity, not some ulterior motive.
At its best, starting a startup is merely an ulterior motive for curiosity. And you'll do it best if you introduce the ulterior motive toward the end of the process.
So here is the ultimate advice for young would-be startup founders, boiled down to two words: just learn."
This is my favorite part. Elon Musk does it this way even after his first few companies. He goes and learns a bunch of stuff to the cutting edge.
Some of my best work and graduate school assignments had started off by being handed an RFC (or a language, or a third party library, or a paper, etc...), asked to become an expert on it, and then implement it (or in the case of a library to re-factor old NIH-y code to use that library, etc...). Learning isn't useful as preparation for something else, but it's extremely rewarding in it of itself.
Keeping this in mind has been very helpful.
Most successful startups are the result of ambitious people working hard to come up with good ideas. PG has explicitly said he started Viaweb to get rich. IIRC it was picked from a list of other startup ideas and was the second attempt. He wasn't deeply fascinated by online stores, it just seemed like a good business to start.
The composition of people attending your typical bi-weekly unmeeting is: few people with money, lots of people who would like some of that money, few random CEOs who look for free employers, and the rest that just wants to hang out with "startup guys" because it's cool (and maybe they get to see some new toys).
None of them will probably be your real customers but most of the people you'll meet are extremely interested in startups and new ideas. It's a crowd of early adopters, willing to try anything. This is worth something, at least while you're starting out and need to validate your ideas.
Compare that with pitching your startup idea to random people in a Walmart, that's way harder than it sounds :)
There must be people out there who have identified problems that software can solve, but who can't build the solutions themselves. Lawyers who know what law firms need or plumbers who know what general contractors need, and such.
"It is said that one of the highest-level and most awe-inspiring of rationalist skills is Sitting And Thinking About Something For Five Minutes.
The sitting part isn’t that difficult. It’s not even that hard to…how should I put it…apply mental effort at the problem. But that mental effort tends to be spent rehearsing the solutions already thought up, retreading worn paths, ruminating on how difficult the problem is.
Coming up with entirely novel ideas is really, really hard."
In other words, if we set out deliberately to "come up with a startup idea" or (in a completely different context) "plot for a short story" we're likely to fall into the "gaming" trap, that is coming up with what _sounds like_ a great idea and could potentially even convince others, e.g., professors in a "Creative Writing" class or investors that it is one.
I've been applying this same tactic when dealing with "once in a million" (which at -- I hate to use this term, but it's actually a good one -- webscale can easily happen once an hour) Heisenbugs: fire up five processes in gdb (as to force contention around network, disk, and CPU), add a bunch of log statements, pepper the code with random usleep()s, and set assertions or watch/break points in "impossible" places -- as opposed to a more rookie approach of rewriting any suspect code ("let's put a lock around this just to be sure...") and hoping the problem goes away.
An ulterior motive behind Sam Altman's startup class? Incredible engagement already with 400+ University viewing groups*
*https://docs.google.com/spreadsheets/d/1P5xh1t0SOUlVmFkLKPk0...
This is basically just speculation (and rather uncharitable speculation at that). And, plausibly, if the YC partners manage to increase the pool of applicants faster than they increase class sizes (which is plausible because the class sizes have not expanded tremendously), it would only raise the bar
> unless qualified applicants are significantly increasing every year
This is probably what is happening.
The question is not like "what code in which language should I write", The fact that Zukerberg wrote a yet-another-bunch-of-webforms in PHP doesn't mean that you should do it too. It isn't about PHP at all, it is about being in a right time in a right place and being able to code some PHP. (the facebook really began after it has been noticed by a "serious guys" from Harvard alumni).
So, it boils down to a very few words - learn some fundamental principles of CS, then become an expert in a field (follow the money), being an expert you would "see" opportunities which cannot be seen by an ignorant observer outside the field. Then try, approach the problem, describe it, discuss, try to write a naive prototype (to discover the difficulties and lack of appropriate knowledge) and then try to make a team. btw, other people in the field would quickly grasp and validate your idea, and if it is really good, they would find money for you, because the result will be beneficial for them.
Another key idea (to which having children is a nice metaphor, at least to those who have no siblings) is that one have to go into unknown. There is no other way. It should be unknown and first time, like any learning on-the-go in any field. We start totally ignorant, and then we learn by doing.
And about gaming the system (another polite-correct name for cheating) - one cannot game yourself. You are either good at what you do or not.
Dagny, there's nothing of any importance in life - except how well you do your work
Something along these lines: http://startupguide.com/world/the-history-of-entrepreneurshi... with less use of the word "entrepreneur" as PG expressed his distaste as such.
At its best, starting a startup is merely an ulterior motive for curiosity. And you'll do it best if you introduce the ulterior motive toward the end of the process.
So here is the ultimate advice for young would-be startup founders, boiled down to two words: just learn."
It's not about the money, it's not about how old you are, it's not about giving up, it's not about tricks or hacks and it's not about the obvious path.
For me it's about the curiosity of genuinely wanting to understand how the world generates, transports and consumes energy and how I can remove the barriers and inefficiencies of transitioning our global society towards using clean energy more efficiently and cost effectively so we can mitigate the effects of climate change.
There's a lot of prescribing of advice, but not too much explaining why it's good advice. Usually there's a few sentences of explanations, but the topic could be discussed in much more depth. I'd like to hear a more complete explanation from pg.
Maybe these are also the same qualities required to be a winning investor. Thinking clearly, loving the area that you're working in, and developing domain expertise.
I started a startup during my undergrad degree, and ended up finishing my degree at the same time. I made a deal with my lecturers to allow me to skip basically everything during the term time, and then just took "holiday" from my startup to write exams. It worked out OK and we raised a lot of money the year after I got my degree. So I don't think that's impossible, but it was pretty hard work.
Management consulting probably has more opportunities for gaming the system than startups do, and I concur. However, my friends who work at management consultants, from what I can tell based on anecdotal evidence, mostly perform value adding work for their clients, including performing managerial duties in for fast grown firms that do not have the talent at hand, performing macroeconomic research and factory floor optimization. My friends are mostly of engineering background, though, so that probably affects the sampling quite a bit.
I would rephrase the dichotomy of not being about adding value vs. gaming the system but about creating something new versus optimizing and tinkering with an established system.
As an example all the protagonists in "The art of profitability" (http://www.amazon.com/The-Art-Profitability-Adrian-Slywotzky...), for instance, deal mostly in a similar problem space as described by my friends' professional war stories.
My question would be "what are the mistakes"?
It would be amazingly interesting if PG, Sam or someone else from YC can start to list some of these warnings / common mistakes in one of the classes.
Obviously, some advice is company specific, however starting to compile this list of advice would be a valuable additional to community knowledge.
That being said, regarding having domain expertise on the furthering boundaries of a topic (presumed technical), I'm not sure if evidence suggests that this is the best way to go. Did this help any of AirBnB/Dropbox/Reddit? These are not "technical" companies, at least what got them started.
Maybe I'm reading too much into how technical the domain expertise should be, though he did mention computer science in his fractal analogy. Perhaps I'm just having a tough time having faith that doing research on the forefront of computer vision will lead to good startup ideas.
And though starting a startup can be part of a good life for a lot of ambitious people, age 20 is not the optimal time to do it.[1]
PG seems to be giving contradictory advice or his stance seems to have changed on whether 20 year olds should start a startup
I think PGs advice doesn't just apply to startups but to nearly everything in life. Learning (or as PG puts it, "Just Learn") is huge part of the equation if one wants to advance. You'll be surprise how this attitude is not very prevalent to the general population of adults.
Want to get earn more money? Just learn how.
Want that promotion? Just learn what you need to achieve.
Not an expert on a particular thing? Just learn from someone else.
In trouble and need help? Just learn where to find it.
Having said that, in my experience, I think another crucial step needs to tie in with learning is self-efficacy to make it worthwhile. Learning is one thing but if you don't have the belief to stick to it and act on it, learning will only get you so far.
Learning is important but life isn't that simple--earning money is mostly leverage and negotiation, promotions are mostly politics, and so on. You can choose not to participate and "just learn" but you'll be at a disadvantage unless you are a truly exceptional learner.
Which is why i say self-efficacy[1] is the other important half of the learning bit. Without it, learning is only just that: learning. If you don't have the belief, motivation or even the tenacity to act and follow through on what you learned, then all you have is just knowledge in your head.
I'd imagine the majority of successful startups never set out with any aspiration of becoming one. I think having that goal is poison and leads people to "playing house" and going through the motions of a successful startup without achieving the key ingredient: a product users need.
- Looks like a case of survivor bias. How many founders who listened as intently did not build Airbnbs ?
"[4] What should you do if your true calling is gaming the system? Management consulting."
- Nailed it.
There were also examples of failure in their portfolio.
And as a proof of being old I would like to congratulate Paul Graham for being one of the very few people in the world to actually use the "begging the question" phrase correctly.
This makes absolutely no sense coming from somebody who built an empire giving advice to budding entrepreneurs.
I would argue (and I'm sure that a lot of people would disagree), that one of the most important things that YC does is give budding entrepreneurs a chance to just get away from everything else in their life and completely focus on their startup.
He also caveats a lot of his points by saying that honestly, he really is never particularly certain which startups or set of founders is really going to take off.
At the end of the day, it's really up to them.
<xa href="relres.html">tough and ambitious</a>------------ I made my first money at 8. I bought a Honda 50 for $60 and sold it for $180 after painting it and fixing some little things. My father guided the whole process of course, but it was my money and my work that got the result. Now I am 45 and I have 4 boys. My oldest is 10 and has been working on his "startup" for two years. He is making his own version of Pokemon, and he has sold some of his characters on T-shirts. Total revenue so far - $120.00 (1)
It is not much. But it is something. At 10, my kid is outsourcing graphic work overseas, he has sent out 30 projects on Fiverr. He is using outside vendors to make shirts, and having to deal with customers asking about shirt orders (he took some money, but forgot to order the shirt. Then he has to deal with upset people). While the dollar amounts are trivial, my purpose it to get him exposed to how business and making money works. So far he has been doing it for 2 years and his quality of work and detail have grown so much that you would probably not believe it. My main job is to ask him if the work is as good as he can make it (most of the time he makes it better, some times he decides that he is done)
The interesting follow on effect for me is that his younger brothers are now wanting to do the same. The 7 year old has been bugging me to get his website done, and has done his first few drawings. His project is very similar to his older brother;s , but we have made sure that they are distinct. Last week the 4 year old decided that he needed a company too (so far it is only a declaration, he has not decided on a concept).
So I guess I am doing it different. I can't imagine waiting until college for them to start. They see what I do, and want to do similar things. So they are. To me it is amazing what they can accomplish, and how "making a company" for them is more interesting than watching TV. This weekend we have a giant vat of playdough waiting to be made. My oldest is going to model the racetrack for his Android game in real life, then translate it to digitial . All of this was his plan, I merely drove to the store to get the materials.
It is not a startup of course, more like a complicated hobby. The kids are having fun, and so am I ,
Maybe in another 10 years my son will be ready for a real startup. By then he will have 10 years into customer service, colabortaing with an international team, product development. Mostly I hope he enjoys himself and learns some things about business. It beats a lemonade stand.
So this is the third counterintuitive thing to remember about startups: starting a startup is where gaming the system stops working. Gaming the system may continue to work if you go to work for a big company. Depending on how broken the company is, you can succeed by sucking up to the right people, giving the impression of productivity, and so on. [2] But that doesn't work with startups. There is no boss to trick, only users, and all users care about is whether your product does what they want.
Then, to his credit, he admits...
The dangerous thing is, faking does work to some degree on investors. If you're super good at sounding like you know what you're talking about, you can fool investors for at least one and perhaps even two rounds of funding. But it's not in your interest to. The company is ultimately doomed. All you're doing is wasting your own time riding it down.
Okay, so we have something to chew on.
First of all, investors are gameable if you're good at social proof arbitrage (that is, lying about competing interest in order to set off a "herd mentality" and become a VC darling). I don't have an ethical problem with social proof arbitrage. It's what you have to do if you want to raise VC and you're not from a very wealthy family.
Is the system gameable? It depends on what your objectives are. You can't build a successful company if you make something no one wants. That's clear. However, let's be cynical and realistic here. Do you care about the success of "the company" or of your own career?
If your investors don't like you but you build a great company, they'll give it (and most of the rewards) to someone they do like. If your investors like you and your company fails, they'll arrange a favorable acqui-hire. This means that you collected $120k for each year that the business was alive, and got a 3x salary bump (plus a 7-figure hiring bonus) in your next job. Or, they might make you a VC.
The part that determines whether your product is Google or Clinkle is difficult, if not impossible, to fake. We don't even understand how many of those random variables work. There's some part that's performance- and skill-related and a large part that's luck, and no one knows where to draw the lines. However, the startup career is immensely gameable, and that's true the whole way to the top (partner-level ranks in VC firms).