Paul Graham: Start a Startup?


You need three things to create a successful starup:

  • start with good people
  • to make something customers actually want
  • spend as little money as possible

The Idea

The way startup makes money is to offer people better technology than they have now. But what people have now is often so bad that it doesn’t take brilliance to do better.

Idea for startup is just beginning.

Idea is not transferrable. Their value is mainly as starting points: as questions for the people who had them to continue thinking about.

What matters is not ideas, but the people who have them. Good people can fix bad ideas, but good ideas can’t save bad people.


Good people: someone who takes their work a little too seriously (obsessive)

Test: Was the person genuinely smart ? If so, could they actually get things done ? Could we stand to have them around ?

When nerds are unbearable it’s usually because they’re trying too hard seem smart. But the smarter they are, the less pressure they feel to act smart. So as a rule you can recognize genuinely smart people by their ability to say things like “I don’t know, Maybe you’re right, I don’t understand x well enough.”

Ideally you want between thwo and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear.

Business people are bad at deciding what to do with technology, because they don’t know what the options are, or which kinds of problems are hard and which are easy.

The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggest you’d do better to learn how to program than get a MBA.

If you can’t undestand users, however, you should either learn how to find a co-founder who can. That is the single most important issue for technology startups.

What Customers Want

In nearly every failed startup, the real problem was that customers didn’t want the product.

Get a version 1 out as soon as you can. The only way to make something customers want is to get a prototype in front of them and refine it based on their reactions.

In a startup, your initial plans are almost certain to be worng in some way, and oyur first priority should be to figure out where. The only way to do that is to try implementing them.

Like most startups, we changed our plan on the fly.

It’s worth trying very, very hard to make technology easy to use. Hackers are so used to computers that they have no idea how horryfing software seems to normal people.

When you work on making technology easier to use, you’re riding that curve up instead of down. A 10% improvement in ease of use doesn’t just increase your sales 10%. It’s more likely to double your sales.

How do you figure out what customers want ? Watch them.

When most people think of startups, they think of companies like Apple or Google. Everyone knows these, because they’re big consumers brands. But for every startup llike that, there are twenty more that operate in niche markets or live quietly down in the infrastructure. So if you start a successful startup, odds are you’ll start one of those.

If you build the simple, inexpensive option, you’ll not only find it easier to sell at first, but you’ll also be in the best position to conquer the rest of the market.

It’s very dangerous to let anyone fly under you. If you have the cheapest, easiest product, you’ll own the low end. Nad if you don’t, you’re in the crosshairs of whoever does.

Raising Money

The way to get rich from a startup is to maximize the company’s chances of succeeding, not to maxime the amount of stock you retain.

How much stock has each founder:

rule of thumb: when everyone feels they’re getting a slighty bad deal, that they’re doing more than they should for the amount of stock they have, the stock is optimally apportioned.

You should get all the founders to sign something agreering that everyone’s ideas belong to this company, and that this company is going to be everyone’s only job.

Before you consummate a startup, ask everyone about their previous IP (intelectual property) history.

Talk to as many VCs as you can, even if you don’t want their money, because a) they may be on board of someone who will buy you, b) if you seem impressive, they’ll be discouraged from investing in your competitiors.

Not spending It

Brand is worth next to nothing in some cases

When you are growing slow by word of mouth, your first batch of users are the ones who were smart enough to find you by themselves. There is nothing more valueable, in the early stages of a startup, than smart users. If you listen to them, they’ll tell you exactly how to make a winning product. And not only will they give you this advice for free, they’ll pay you.

Design your product to please users first, and then think about how to make money from it. If you don’t put users first, you leave a gap for competitors who do.

To make something users love, you have to undestand them. And the bigger you are, the harder that is. So I say “get big slow”. The slower you burn through your funding, the more time you have to learn.

When you get a couple million dollars from a VC firm, you tend to feel rich. It’s important to realize you’re not. A rich company is one with large revenues. This money isn’t revenue. It’s money investors have given you in the hope you’ll be able to generate revenues. So despite those millions in the bank, you’re still poor.

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