Before the Startup

by bhaumik • 12 years ago

703 163 12 years ago

mlyang• 12 years ago

I find it interesting how YC is trying to increase its classes sizes significantly and YC partners are traveling all around encouraging everyone to apply (which would seemingly reduce the standard for getting in, unless qualified applicants are significantly increasing every year) in light of pg's point about gaming the system. Getting into an incubator, for many applicants, is effectively like "playing house" at starting a company or gaming the system, when really what those people should be focusing on is just building/growing their product, rather than figuring how to get into an incubator before they have a validated product. Especially given the predictors on a YC app that might increase an applicant's chance of getting in (prestigious school, work experience, etc.), seems like there are still lots of opportunities for "gaming the system" in YC.

bhaumik• 12 years ago

>which would seemingly reduce the standard for getting in, unless qualified applicants are significantly increasing every year

An ulterior motive behind Sam Altman's startup class? Incredible engagement already with 400+ University viewing groups*

*https://docs.google.com/spreadsheets/d/1P5xh1t0SOUlVmFkLKPk0...

argonaut• 12 years ago

> which would seemingly reduce the standard for getting in This statement is fairly unfounded

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.

nl2• 12 years ago

one guaranteed way to turn your mind into the type that has good startup ideas is to get yourself to the leading edge of some technology—to cause yourself, as Paul Buchheit put it, to "live in the future." When you reach that point, ideas that will seem to other people uncannily prescient will seem obvious to you. You may not realize they're startup ideas, but you'll know they're something that ought to exist.

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.

aresant• 12 years ago

Thank you for putting that quote into context for me - have always enjoyed it, never saw quite so good an example.

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).

waterlesscloud2• 12 years ago

Interesting insight.

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.

nl2• 12 years ago

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.

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.

rokhayakebe3• 12 years ago

Reading a bit of history you usually notice how famous painters, and other artists, lived close to each other. The same is true of scientists, I am sure.

kinkora2• 12 years ago

Well written article.

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.

lmartel• 12 years ago

This is the sort of advice that, imo, sounds great (especially to HN readers and PG fans) but isn't actually helpful or correct.

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.

kinkora2• 12 years ago

Yep, I wholly agree!

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.

[1] http://en.wikipedia.org/wiki/Self-efficacy

schmidtc• 12 years ago

The general idea of the essay is, i think, spot on. However, like you say it's a bit idealistic. In practice the mountain of student debt facing your average college grad changes the nature of the discussion.

bdr• 12 years ago

Regarding the first point, I recently came to this conclusion: "The reason listening is hard is that not-listening doesn't feel like not-listening, it just feels like the other person is wrong."

Keeping this in mind has been very helpful.

AndrewKemendo• 12 years ago

I was really hoping this article would be about how massive companies were built (billion dollar or otherwise) before the invention of the "startup."

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.

davidw• 12 years ago

That article, expanded, would make a fantastic, fantastic book, if done properly.

TheUnPedant• 12 years ago

Yet when it comes to startups, a lot of people seem to think they're supposed to start them while they're still in college.

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?

m52go• 12 years ago

Yeah I find that statement strange.

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.

apsec112• 12 years ago

"The three big powers on the Internet now are Yahoo, Google, and Microsoft. Average age of their founders: 24. So it is pretty well established now that grad students can start successful companies. And if grad students can do it, why not undergrads? (...)

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.

sjg007• 12 years ago

So if you exclude 20 and 21, you are still in your early twenties and you just graduated from college.

NewHermes• 12 years ago

I didn't get the vibe that PG was saying not to start a company in college. I may have misinterpreted him incorrectly, but to me the advice was to not do both simultaneously.

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.

davmar• 12 years ago

PG is a living man. the essay is a dead document.

staunch3• 12 years ago

I think he's been iffy on that question for at least years. I remember a talk where he disagreed with an audience member who was suggesting people should always drop out.

DodgyEggplant2• 12 years ago

Everybody should adjust to facts and experience. PG points to an important issue that this is an important period in life where you are old enough to to do things kids can't, yet young enough without the daily responsibilities which will patiently wait for you for the next decades. The startup can wait after these unique years

strlen8• 12 years ago

Refusing to change your mind in light of contradicting evidence is not a virtue :-)

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.

omarhegazy• 12 years ago

Yea, I was kind of surprised when he said college students shouldn't start startups.

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.

dheer01• 12 years ago

"[1] Some founders listen more than others, and this tends to be a predictor of success. One of the things I remember about the Airbnbs during YC is how intently they listened."

- 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.

kiba• 12 years ago

- Looks like a case of survivor bias. How many founders who listened as intently did not build Airbnbs ?

There were also examples of failure in their portfolio.

namenotrequired• 12 years ago

I don't think it's survivor bias. PG wrote about the opposite as well about the worst startups they funded: "I could never quite tell if they understood what I was saying."

http://www.paulgraham.com/word.html

adamzerner• 12 years ago

Nice to hear from pg again. I love his writing. He has useful points, and says them well. HOWEVER...

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.

projectileboy• 12 years ago

While I certainly can't speak for PG, I would imagine that the advice is simply derived empirically, and so doesn't really demand a great deal of elaboration.

malanj• 12 years ago

This is a really useful perspective for undergrads. I would have gained a lot of value if I could have read this while studying.

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.

staunch3• 12 years ago

It seems odd not to acknowledge that most successful startups are not created like this. Very few are. Perhaps only the truly great ones take the organic personal project route. Apple, Google, Facebook, and YC are among the handful one could list out of thousands of startups.

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.

philwelch2• 12 years ago

As an investor, you'd rather fund Apple, Google, or Facebook than Viaweb.

mahyarm• 12 years ago

Not necessarily. Would you properly fund EverPix or TextSecure, or would you worry about them sticking to their principles too much and avoiding potential profit opportunities?

dkural• 12 years ago

"So strangely enough the optimal thing do to in college if you want to be a successful startup founder is not some sort of new, vocational version of college focused on "entrepreneurship." It's the classic version of college as education for its own sake. If you want to start a startup after college, what you should do in college is learn powerful things. And if you have genuine intellectual curiosity, that's what you'll naturally tend to do if you just follow your own inclinations. [10]

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.

DodgyEggplant2• 12 years ago

The most important point in the lecture: Startups are the one area where the traditional gaming of the system will not work. May bring you seed or even series A, but not users. Learning in a college is, after all, gaming a traditional system.

strlen8• 12 years ago

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.

Vulkum• 12 years ago

Some of the things I've learned at university are pretty interesting and fun to play with. Now, notice the "fun to play" with part. Some thing require a lot of investment (both money and time) in order to be learned. So, I believe it's not unfeasible to want to start a company so that you can fund your curiosity and learn the new things. The company itself might fail, or might not, but I believe as long as the purpose was to learn something new, failing is not as bad. If you start a company thinking this is the future, and you put value in making money as opposed to learning, then failing is losing.

chton• 12 years ago

In an ideal world, that would be possible, yes. But a company does need to make some money, even if only to pay its founders for their time. That money can come from investments, but if you start a company just to learn new stuff you'll have a hard time finding those.

Patient0• 12 years ago

I found this ironic given that he was saying this as a guest lecturer for Sam Altman's "startup" class at Stanford.

dnissley• 12 years ago

I didn't find it ironic because those are people who are quite likely to go out and do the opposite, which is to focus on money or some other extrinsic motivation.

jforman2• 12 years ago

"So starting a startup is intrinsically something you can only really learn by doing it"

This makes absolutely no sense coming from somebody who built an empire giving advice to budding entrepreneurs.

ar7hur• 12 years ago

No, PG built that not by giving advice to founders, but by selecting them.

jforman2• 12 years ago

How did he get into a position where he has his choice of founders? He built the empire by offering mentorship, money, and community (which is peer-to-peer mentorship). In the beginning, the draw wasn't money because they didn't offer much of it.

startupfounder• 12 years ago

"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."

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.

fsloth2• 12 years ago

A very nice read as always. Footnote [4] is a bit off-putting though "[4] What should you do if your true calling is gaming the system? Management consulting."

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.

sanxiyn• 12 years ago

You can add value by gaming the system. Gaming the system is a mean, not a goal.

fsloth2• 12 years ago

Good point, I hadn't thought of it in that way but very true. Most systems have pathologies and you just need to work around them somehow. I agree: Gaming for personal profit and gaming for some higher goal are two different things.

mychaelangelo• 12 years ago

thanks for sharing the link to that book - i will be grabbing a copy and reading it this weekend!

aashaykumar922• 12 years ago

I'm a college kid, started a startup with my roommate and sold it to our university. We did everything wrong, but learned so much that I could write a thesis on it. If I had to do it again and change ONE thing, though, it would be one of PG's central points in this post: get to know your users. We knew who they were at a big picture (UofM students) but did not do a good job honing on on specific 'personality types' that would enjoy our app nor did we keep in touch with our loyal users as much as we should have. Will definitely do that when a next time comes around. The crazier, and daunting, part of reading this post is realizing that despite how much I learned from my first startup, there will be so much to learn from when I find the next fun thing or problem to work at. Can't wait.

joshdance• 12 years ago

What did your product do?

aashaykumar922• 12 years ago

It was a social calendaring app exclusive to UofM students. We uploaded the course database so students could pick the classes they were enrolled in and sync it to a calendar (students could also sync their other calendars) and share it with their friends. It was an easier way for UofM students to see what their friends/classmates were upto throughout the day.

akassover• 12 years ago

I like the term "playing house". Seems like there are a lot of similar activities. I don't make it to many "startup" type events, but when I do, I always wonder why everyone there is spending so much time hanging out with each other instead of going to the events their customers go to.

TeMPOraL7• 12 years ago

From my observations as a participant of such events, people actually working on startups don't frequent them.

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).

melvinmt• 12 years ago

This is spot on (especially for the "Hackers & Founders" kind of meetups) but there are a subset of (technical) events that are full of smart people and less bullshitters.

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 :)

ja27• 12 years ago

Yep. Even in my area I could go to 2-5 startup events a week but so much of it just feels so fake and full of hanger-ons that just want to be associated with startups. It is nice to get out once in a while, but I get a lot more out of virtually hanging out with my group of other indie app developers that actually sell.

austinhutch• 12 years ago

I think there is some truth to this, but personally, I've been to events on both sides of the coin. StartX, for instance, hosted an event where I met several smart people and heard two fantastic presentations. If I were working on a startup, maybe I wouldn't have time to attend, but I'm not at the moment and why not meet and network with smart people with similar interests? That being said, there is a lot of BS you have to circumnavigate.

strlen8• 12 years ago

Can this advice be generalized to other creative endeavors in general? There's an interesting article by Scott Alexander, "Negative Creativity" http://slatestarcodex.com/2014/08/05/negative-creativity/

"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.

atmosx• 12 years ago

I find it much more natural to walk/run and think about a problem. I don't know what you need to do when you need to keep notes and look at numbers while approaching the problem, you can't do that on your iPhone while walking, but generally speaking running/walking disconnects my brain from my body very effectively. So all I need to do is focus on the problem, but doesn't take as much as effort as it would take if I did it while sitting on a desk.

ProAm• 12 years ago

It's referred to as 'dissociative thinking'. The back burner of your mind... similar to waking in the middle of the night with an answer to a problem that has been plaguing you for days

sayemm• 12 years ago

PG, this has been one of your best essays IMO.

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.

rumcajz2• 12 years ago

The claim made is that "gaming doesn't work on users". The claim breaks down when selling to the enterprise.

senderista• 12 years ago

That's because you're not selling to the actual users of your product.

rumcajz2• 12 years ago

Yes. That's how it goes in enterprise sales.

IsaacL2• 12 years ago

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. Startups are as impersonal as physics. You have to make something people want, and you prosper only to the extent you do.

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.

schoolixer• 12 years ago

It is curious that people spend so much time considering games to avoid actual work rather than figure out work that they can enjoy; or at least feel a sense of progress.

strlen8• 12 years ago

How do you bootstrap a company that requires significant R&D before an MVP can be shipped? Or for that matter one that has initial infrastructure costs, or one would only be affordable if there's an economy of scale?

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.)

onion2k• 12 years ago

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.

adrianhoward2• 12 years ago

"How do you bootstrap a company that requires significant R&D before an MVP can be shipped? Or for that matter one that has initial infrastructure costs, or one would only be affordable if there's an economy of scale?"

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.

gizmo• 12 years ago

How do you bootstrap a company that requires significant R&D before an MVP can be shipped?

First you bootstrap something less ambitious. Then you can use that money to start more R&D heavy companies.

3pt141593• 12 years ago

You can easily start a company that requires significant R&D: start with consulting; then one day sell the product you want to make with the right license and timeline, then make it and sell it to everyone. Look at Space X, they were making money wayyy before they were igniting rockets.

rokhayakebe3• 12 years ago

Are you under the impression that most interesting R&D is done at venture-backed startups?

What about universities and government funded projects?

Are you also under the impression that most interesting R&D need significant funding?

alain94040• 12 years ago

How do you bootstrap a company that requires significant R&D before an MVP can be shipped

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.

jaoued• 12 years ago

I disagree with you on academia, as the checks & balances plus the peer review system for worldwide recognised published research kill and destroy bullshitters. I am not saying there aren't any but having been in both academia & corporate, the latter is infested with them.

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.

Allower• 12 years ago

"the checks & balances plus the peer review system for worldwide recognised published research kill and destroy bullshitters"

if only this was true!!

TeMPOraL7• 12 years ago

Well it is already painfully visible that "checks & balances plus peer review" is barely managing to hold science together. Research has already been thoroughly gamed on a systemic level. Scientific funding and the whole "publish and perish" culture pretty much promotes bullshit over real research nowadays. And while solutions are easy to name (increase rigor for statistical significance, publish negative results, make scientist pre-publish description of planned data analysis before collecting data, etc.) they are almost impossible to implement, as everyone inside the system is trapped by the incentive structures that drive the whole thing.

LunaSea• 12 years ago

A very high percentage of memoirs, thesis and research papers that contain source code doesn't compile, run or work as expected.

Peer review doesn't work in science because nobody cares to review unknown or lesser known authors.

grayclhn• 12 years ago

Ah, you must have never had to deal with administration.

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... ;)

johnward3• 12 years ago

I don't really remember those two talking about startups being gameable in the way that PG is talking about megacorps. Most of the reasons they prefer bootstrapping vs startups are around the idea that bootstrapping has a predicable model for success. Where as your chances of a successful exit in a startup are like winning the powerball. Even PG notes that one good exit covers the losses of hundreds of other investments and that they still don't really know how to pick winners (they just happen). Startups that take VC are also kind of designed to fail early so as to not waste too much investor money. The other pro for bootstrapping seems to be around the idea of "freedom" from bosses. In a megacorp you work for like 14 bosses. In a startup your bosses are the VC's. As bootstrapper you work for yourself and the people that pay your for what you produce.

j452• 12 years ago

Bootstrapping is not excluded from being a startup. 98% of all startups in Canada, for example (tech included) are self-funded.

There ultimately is little freedom from bosses. Either your VC's are, or paying customers are.

ingenieros• 12 years ago

Looking at the valuations of the likes of Snapchat I think it's pretty safe to assume that B.S has already taken over.

patio11• 12 years ago

I think you may be attributing to me some things which I don't recall having written.

AznHisoka2• 12 years ago

can we pretend you wrote them though? It would make me think even more highly of you :P

pchristensen• 12 years ago

IIRC, you've said things more along the lines of "VC interests are often not aligned with founders' interests" and "VC funding isn't really my cup of tea". Amy Hoy and 37signals/Basecamp are the ones who ardently speak out against VC funding as a business strategy.

IsaacL2• 12 years ago

Sorry. As my sibling poster pointed out, I think I mixed you up with other pro-bootstrap/anti-VC writers.

soundlab3• 12 years ago

I think one of the distinctions is that for bootstrapping you can start with something (very) small and end with something big over a long period of time. Whereas when you take on venture capital the expectation is to build something very big very fast.

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.

beachstartup3• 12 years ago

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.

happyscrappy• 12 years ago

You have to make something people want, and you prosper only to the extent you do.

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.

poteleu2• 12 years ago

Diana Kander has an interesting view about that in her book "All in startup". She mentions that it is not enough to find a "headache" the people have (problems they can live with), you have to find a "migraine problem" (problem they'll do anything to get rid of). Obviously, you still need to get the people to know about your product.

rayiner• 12 years ago

Even users are gameable. What do you think advertising is?Companies spend vast sums of money on user acquisition.

cjdrake• 12 years ago

I wish he included that joke about users being like sharks. Something like "you can't trick sharks; it's meat or no meat".

akbar501• 12 years ago

pg wrote, "Batch after batch, the YC partners warn founders about mistakes they're about to make..."

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.

surreal• 12 years ago

The 18 Mistakes That Kill Startups by Paul Graham http://www.paulgraham.com/startupmistakes.html

revorad• 12 years ago

A list from 2006 - http://paulgraham.com/startupmistakes.html

tegeek• 12 years ago

This is one of the best & "easy to understand" article I've read on start-ups, entrepreneurship etc. in a long time.

TeMPOraL7• 12 years ago

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(...) 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. Startups are as impersonal as physics. You have to make something people want, and you prosper only to the extent you do.

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 want startups to be like pg describes. Maybe the most successful ones are like that. But there are so many that don't care about users that people are already developing a huge mistrust with everything-SaaS. I guess it's exactly like univerity - you can game your way through it if you treat is as an intermediate step. That your trick-grades don't reflect any actual knowledge doesn't matter after they get you a good job.

ak393• 12 years ago

  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.

When startups do what they're supposed to do (making things people want), that's not gaming the system. That's being industrious. Gaming the system is about not being industrious with regard to producing things that will sell.

Ma8ee• 12 years ago

The important distinction is between what people want and what people are prepared to pay for. So when your startup is making something people want, but few are prepared to pay for, you can get a massive user base that make it look like you have a very solid startup which you manage to sell for huge amounts of money, while the company only has a tiny chance to ever make a profit. Then you have gamed the system.

waterlesscloud2• 12 years ago

The 'gaming the system' section gave me insight into both why 'growth hacking' is such a popular idea and why I hate the term.

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.

TeMPOraL7• 12 years ago

Honestly, with fierce hatred I hate that term. It basically means "word 'hacker' sounds cool, so let's make marketing cooler by renaming it to 'growth hacking'". Seriously, just look at the Wikipedia article[0] and see how meaningless this term is. The whole text is just basically pile of buzzwords.

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.

[0] http://en.wikipedia.org/wiki/Growth_hacking

zem• 12 years ago

i found it a bit jarring that pg has bought into the idea of "known boring ideas" - there is little that is not interesting to somebody. i would cheerfully read books on literary theory, for instance, and i'm sure that doing middle management cleanly and efficiently involves challenges that are interesting to people who are intrinsically interested in group dynamics and effort-to-result optimisation.

sreyaNotfilc• 12 years ago

Hey guys, I believe this is from the "How To Start A Startup Lecture 3", so if you'd like to hear it go here... https://www.youtube.com/watch?v=ii1jcLg-eIQ

joeyspn• 12 years ago

Another great essay by PG... I would just add (in the All-Consuming part) that startups are all-consuming either if you make it or you fail... at least that is what experience has taught me. It's important to know when you have to pull the plug.

donutreceipt• 12 years ago

Title should be: "Just Learn"

brudgers2• 12 years ago

For me, reading Paul Graham's writings has taken on something of the flavor of a Phillip Roth novel. I'm committing voyeurism, watching the inner life of the protagonist, PG, mature. There's an arc to the narrative.

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

raldi• 12 years ago

Your footnote [1] is disowned.

brudgers2• 12 years ago

It's the answer to "pun intended?"

michaelochurch• 12 years ago

There's a lot of good in this essay. I'm going to attack the weak point, even though I agree with most of it.

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).

dschiptsov• 12 years ago

The magic formula, it seems, is "become an expert in something that matters (what other people want or need to be done) usually in a non-CS realm, but you must "love it" and then apply CS with someone who could program/engineer better than you". At least it resembles a pg + rtm pair.)

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

This has been written half century ago, and still true (no matter how naive it sounds), especially for startups.

olleicua• 12 years ago

Fantastic article

mentos• 12 years ago

What are the examples of successful startups that were created deliberately to 'start a startup'?

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.

hristov• 12 years ago

Great essay! It makes me feel good to know that random curiosity may prove to be a good thing somehow. Alas, I am much older than his intended audience.

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.

trop• 12 years ago

Slightest nitpick...a missing hyperlink due to handcoded (?) html in lines 240-41:

   <xa href="relres.html">tough and ambitious</a>

zxcvvcxz• 12 years ago

Nice I like this, it makes me feel somewhat better about choosing to pursue graduate education (in engineering) over getting a job at a bigco in my field. I will certainly learn more fundamental concepts, and frankly, work on much more interesting technical problems.

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.

gregpilling• 12 years ago

"My kids are little, but I can imagine what I'd tell them about startups if they were in college, and that's what I'm going to tell you."

------------ 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.

1 https://www.facebook.com/legimon?ref=hl

budu3• 12 years ago

What's an especially productive 22 year old to do?[...] If you're really productive, why not make employers pay market rate for you? Why go work as an ordinary employee for a big company, when you could start a startup and make them buy it to get you?[0]

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

[0] http://paulgraham.com/hiring.html

[1] http://paulgraham.com/before.html

Before the Startup

Related Stories