PG’s Best Essays for Would-Be Founders

2020-05-13 Founder Picture

Most of you might already know who Paul Graham (PG) is. But if not…
Paul Graham is a legend in the startup world. He co-founded Viaweb, which was the world’s first web app, and sold it to Yahoo. After that he co-founded the startup accelerator Y Combinator. Y Combinator has helped to produce some of the biggest tech companies in the world, such as Airbnb, Dropbox, Stripe, Doordash, Instacart … the list goes on
 
He also writes essays, and in a lot of them he focusses on his area of expertise; startups. Here are some of his best essays about how to become someone that notices good startup ideas and the things to do at very early stages. I’ve included summaries of the main points, but I would advise any wannabe startup founders to read the full version of these essays. They contain invaluable nuggets of wisdom. 

Before the Startup (October 2014)
http://www.paulgraham.com/before.html
  • Startups are counterintuitive; if you trust your instincts, you’ll make a lot of mistakes.
  • "You can, however, trust your instincts about people".
  • Some counterintuitive points about startups:
  • It’s not important to know a lot about startups, before starting one. Instead, you need to be an expert on your users and the problem you are solving. 
  • When starting a startup, you can’t game (or trick) the system in the way that you often can in school or in a corporate job.
  • Startups are all-consuming- they will take over your life to a degree you can’t imagine. 
  • You can’t really tell if starting a startup is for you. 
  • The way to get startup ideas is not to think of startup ideas (this is the subject of the third and fourth essays on this list).
  • Instead, you should turn your mind into the type that forms startup ideas subconsciously by:
    • Learning about things that matter
    • Working on problems that interest you …
    • … With people you like and respect
  • “So, here is the ultimate advice for young would-be startup founders, boiled down to two words: just learn.”

Do Things that Don’t Scale (July 2013)
http://www.paulgraham.com/ds.html
  • “A lot of would-be founders believe that startups either take off or don't.”
  • “Actually startups take off because the founders make them take off.”
  • Recruit
  • “The most common unscalable thing founders have to do at the start is to recruit users manually.”
  • Founders are hesitant to do this due to a combination of shyness and laziness
  • But also, because the numbers seem so small at first
  • They underestimate the power of compound growth
  • “If you have 100 users, you need to get 10 more next week to grow 10% a week. And while 110 may not seem much better than 100, if you keep growing at 10% a week you'll be surprised how big the numbers get. After a year you'll have 14,000 users, and after 2 years you'll have 2 million.”
  • If the market exists you can start by growing the user base manually and then switching to less manual methods.
  • Fragile
  • Inexperienced founders and investors judge young startups by the standards of established ones. This is silly.
  • Often founders don’t understand the full potential of what they are building
  • “The question to ask about an early-stage startup is not "is this company taking over the world?" but "how big could this company get if the founders did the right things?"”
  • How do you find users to recruit?
  • If you are solving your own problems – recruit your peers
  • Otherwise, you can launch and see which kinds of users seem most enthusiastic about your idea.
  • Delight
  • You should take extraordinary measures to keep your users happy e.g. Wufoo used to send each new user a hand-written thank you note.
  • Founders worry that lots of focus on individual customers won’t scale, but very early stage startups have nothing to lose.
  • The biggest thing that prevents founders from doing this is their experience of customer service, mostly from big companies. 
  • But that’s an advantage of a startup- you can provide a level of service big companies can’t. 
  • Experience
  • Steve Jobs said attention to customers should be “insanely great”. By insanely, he meant that “one should focus on quality of execution to a degree that in everyday life would       be considered pathological.”
  • For very early-stage startups, “it’s not the product that should be insanely great, but the experience of being your user”.
  • Fire
  • “Sometimes the right unscalable trick is to focus on a deliberately narrow market. It's like keeping a fire contained at first to get it really hot before adding more logs.”
  • “That's what Facebook did. At first it was just for Harvard students.”
  • Most startups who use this strategy do it unconsciously. “They build something for themselves and their friends, who happen to be the early adopters, and only realize later that     they could offer it to a broader market.”
  • Other startups are often the best early adopters
  • Meraki
  • Hardware startups face the issue of minimum orders for factories. 
  • The advice is to “pull a Meraki” which means to assemble the first few products yourselves.  This is what the founders of Meraki did at the very start. 
  • Consult
  • Sometimes we advise B2B startups to act like consultants building something specifically for one user. 
  • As long as you are not being paid as a consultant, but rather are a product company being extra attentive, this is fine. 
  • Manual
  • “When you only have a small number of users, you can sometimes get away with doing by hand things that you plan to automate later.”
  • “Some startups could be entirely manual at first”. This was the exact technique used by Carsten
  • Big
  • The Big Launch is a tactic that usually doesn’t work
  • Think of some successful startups you know. Do you remember their launch?
  • Partnerships also don’t usually work as a method to get growth started
  • Vector
  • We should try thinking of startups as “pairs of what you're going to build, plus the unscalable thing(s) you're going to do initially to get the company going.” i.e. think of startup ideas as vectors rather than scalars. 

How to Get Startup Ideas (November 2012)
http://www.paulgraham.com/startupideas.html
  • The best way to get startup ideas is to look for problems – preferably ones you have yourself
  • Many founders end up building things nobody wants, because they begin by trying to think of startup ideas. 
  • This often yields bad ideas that sound plausible enough to start working on
  • Well
  • When a startup launches, there must be some people that need what you are making urgently. 
  • Usually, this initial group of users is small.
  • It’s better to build something that a small number of people want a large amount, rather than something a large number of people want a small amount. 
  • “When you have an idea for a startup, ask yourself: who wants this right now? Who wants this so much that they'll use it even when it's a crappy version one made by a two person startup they've never heard of? If you can't answer that, the idea is probably bad.”
  • This is a necessary but not sufficient condition for a good startup idea. There should be a path from this initial core of users to a wider set of users. 
  • Self
  • Occasionally, it’s obvious that there is a path out of an initial niche. But often this isn’t the case. 
  • So how does one pick between ideas?
  • “If you're at the leading edge of a field that's changing fast, when you have a hunch that something is worth doing, you're more likely to be right.”
  • Being at the leading edge doesn’t necessarily mean a researcher pushing the field forward. You can be at the leading edge as a user. 
  • “Live in the future, then build what’s missing” – Paul Bucheit
  • "If you're not at the leading edge of some rapidly changing field, you can get to one. "
  • “For example, anyone reasonably smart can probably get to an edge of programming (e.g. building mobile apps) in a year”.
  • “Since a successful startup will consume at least 3-5 years of your life, a year's preparation would be a reasonable investment”.
  • Noticing
  • “If you’re really at the leading edge of a rapidly changing field, there will be things that are obviously missing. “
  • Think about what is missing. Don’t think “Could this be a big company?”
  • Pay attention to things that chafe you
  • When you find the right sort of problem, you should be able to describe it as obvious, at least to you.
  • “Which means that … coming up with starting ideas is a question of seeing the obvious”
  • Give yourself time 
  • “You have a lot of control over the rate at which you turn yours into a prepared mind, but you have less control over the stimuli that spark ideas when they hit it.”
  • Work on projects that seem cool. If you do that, you’ll naturally tend to build things that are missing. 
  • School
  • So what should you do if you’re still at school or university?
  • Clash of domains are a good source of ideas
  • If you’re a programmer – intern at a biotech company, for example. 
  • Or … just build things
  • “But don't feel like you have to build things that will become startups. That's premature optimization. Just build things. Preferably with other students.”
  • Competition
  • Worrying that you’re too late is the sign of a good idea. Don’t let that deter you.
  • ‘Ten minutes of searching the web will usually settle the question”
  • “It's exceptionally rare for startups to be killed by competitors — so rare that you can almost discount the possibility. So unless you discover a competitor with the sort of lock-in that would prevent users from choosing you, don't discard the idea.”
  • Ask users. “The question of whether you're too late is subsumed by the question of whether anyone urgently needs what you plan to make.”
  • Then the question is: Are your initial users doing something lots more people will be doing in the future?
  • If it is, your market is probably big enough no matter how small it is. 
  • Err on the side of doing things where you’ll face competitors
  • “Whether you succeed depends far more on you than on your competitors. So better a good idea with competitors than a bad one without.”
  • “You don't need to worry about entering a "crowded market" so long as you have a thesis about what everyone else in it is overlooking.”
  • A crowded market is actually a good sign because it means there is demand and the existing solution aren’t good enough. 
  • “A startup can't hope to enter a market that's obviously big and yet in which they have no competitors. So any startup that succeeds is either going to be entering a market with existing competitors, but armed with some secret weapon that will get them all the users (like Google), or entering a market that looks small but which will turn out to be big (like Microsoft). “
  • Filters
  • “The space of convenient startup ideas has been stripped pretty clean.”
  • Look for ideas in messier, more tedious spaces
  • “Starting a successful startup is going to be fairly laborious no matter what”
  • Recipes
  • Sometimes you need an idea now e.g. if your current venture is failing and you need to pivot
  • These are tricks to coming up with ideas on demand, although you’re better off using the organic methods discussed earlier
  • Look in areas where you have expertise
  • Look for things you need
  • “One good trick is to ask yourself whether in your previous job you ever found yourself saying: Why doesn't someone make x?”
  • Ask yourself what’s unusual about you that makes your needs different from other people
  • If you’re changing ideas: did you discover any needs while working on the previous idea?
  • “If you're a young founder (under 23 say), are there things you and your friends would like to do that current technology won't let you?”
  • Talk to other people about the gaps they find in the world
  • If you find an unmet need that’s not your own- act like a consultant. Solve the problems of one user.
  • You can also make other people’s problems your own e.g. if your idea is for restaurants, work as a waiter.
  • Seek out unsexy ideas. What do you wish someone else would build, so that you could use it?
  • Look for companies and industries that are dying, and think about what kind of company would profit from their demise
  • “since the most successful startups generally ride some wave bigger than themselves, it could be a good trick to look for waves and ask how one could benefit from them.”
  • Organic
  • “Live in the future and build what seems interesting. Strange as it sounds, that’s the real recipe”.

Ideas for Startups (October 2005)
http://www.paulgraham.com/ideas.html
  • People think coming up with ideas for startups is difficult because they overvalue ideas. They are searching for an idea which you can implement and immediately turn into a million-dollar startup. 
  • Try to sell an idea. No one would buy it. Which suggests that ideas by themselves are worthless. 
  • Questions
  • “The main value of your initial idea is that, in the process of discovering it’s broken, you’ll come up with your real idea”. 
  • The initial idea is just a starting point. Phrase it like a question.
  • “If an idea is a blueprint, it has to be right. But if it’s a question, it can be wrong, so long as it’s wrong in a way that leads to more ideas”.
  • Upwind
  • To generate these types of questions you need to: be familiar with promising technologies and have the right kind of friends (you need people to bounce ideas off). 
  • Some jobs are well paying precisely because they are downwind – they limit your options. 
  • “A job that lets you work on exciting new stuff will tend to pay less, because part of the compensation is in the form of the new skills you'll learn.”
  • Doodling
  • The most productive setup may be thinking about some problem with friends, going off alone and letting your mind wander, and then reconvening. 
  • “Perhaps letting your mind wander is like doodling with ideas”
  • “You have certain mental gestures you've learned in your work, and when you're not paying attention, you keep making these same gestures, but somewhat randomly”.
  • Problems
  • “I find that to have good ideas I need to be working on some problem. You can't start with randomness”.
  • Its harder to see problems than solutions because people are in denial about their problems
  • “Imagine if people in 1700 saw their lives the way we'd see them. It would have been unbearable.”
  • Recipe: finding a problem intolerable and thinking it must be possible to solve. 
  • Wealth
  • Unlike ideas in general, startup ideas have to be ideas that eventually make money.
  • Especially in technology, ideas that make money are close to good ideas. 
  • “I think they're so close that you can get away with working as if the goal were to discover good ideas, so long as, in the final stage, you stop and ask: will people actually pay for this? Only a few ideas are likely to make it that far and then get shot down.”
  • One way to make something people want is to look for things that people use now but are broken e.g. dating sites in the early 2000s
  • Another way is to make a luxury into a commodity
  • The best way to solve a problem is often to redefine it – technique PG learned from Michael Rabin
  • Making things cheaper is a subset of making things easier
  • Design for Exit
  • Success for a startup means getting bought or going public, and the number of startups that go public is very small.
  • This is another source of ideas: think about what big companies should be doing, and do it yourself. 
  • “Be sure to make something multiple acquirers want…when there is only one acquirer, they don’t have to hurry”. 
  • The Woz Route
  • “The most productive way to generate startup ideas is also the most unlikely-sounding: by accident.”
  • “This is not the only way to start startups. You can sit down and consciously come up with an idea for a company; we did. But measured in total market cap, the build-stuff-for-       yourself model might be more fruitful.”

How to Start a Startup (March 2005)
http://www.paulgraham.com/start.html
  • “You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible”.
  • These are all difficult; but doable
  • Idea
  • You don’t need a brilliant idea to start a startup
  • An initial idea is just a starting point
  • “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.”
  • People
  • A rule for deciding who to hire – could you describe this person as an animal? Someone who is obsessive about what they do
  • “What you should do in college is work on your own projects. Hackers should do this even if they don't plan to start startups, because it's the only real way to learn how to              program.”
  • Two to four founders are ideal
  • “One person would find the moral weight of starting a company hard to bear”.
  • Too many founders can lead to disagreements causing factions
  • In a tech startup, the founders should include technical people. 
  • What customers want
  • “The only way to make something customers want is to get a prototype in front of them and refine it based on their reactions.”
  • “It’s worth trying very, very hard to make technology easy to use…. A 10% improvement in ease of use doesn’t just increase your sales 10%. It’s more likely to double your          sales.”
  • “No matter what kind of startup you start, it will probably be a stretch for you, the founders, to understand what users want.”
  • “The only kind of software you can build without studying users is the sort for which you are the typical user.”
  • “If you try to start the kind of startup that has to be a big consumer brand, the odds against succeeding are steeper. The best odds are in niche markets.”
  • “Start by writing software for smaller companies, because it's easier to sell to them.”
  • Often a successful method for startups is to make something that was previously expensive, cheap. Like what Henry Ford did for cars. 
  • Raising money
  • “I think it's wise to take money from investors. To be self-funding, you have to start as a consulting company, and it's hard to switch from that to a product company.”
  • Do not be unnecessarily stingy with equity – “The way to get rich from a startup is to maximize the company's chances of succeeding, not to maximize the amount of stock you retain. So if you can trade stock for something that improves your odds, it's probably a smart move.”
  • The first thing you need is seed capital – a few tens of thousands of dollars to pay your living expenses while you develop a prototype. 
  • Often you get seed capital from angel investors – rich individuals who often have a background in technology themselves
  • Some angels may be happy with a demo and a description of what you do, but others may ask for a business plan, explaining what you plan to do, how you’re going to make money and giving some background about the founders.
  • To get this money, you’re going to have to have to incorporate.  
  • Splitting equity is not easy. Rule of thumb – if everyone feels like they are doing slightly more than they should for the stock they have, that is a sign of a good split. 
  • When incorporating, get everyone to sign an agreement which says their ideas belong to this company. 
  • Ask all founders about their intellectual property history. Often the companies you work for have a clause in the employment contract which says they own your ideas.  
  • In the next round of funding, you might have to deal with Venture Capital (VC) firms
  • They are slow to make decisions so approach them early
  • Getting money from VCs is a bigger deal than from angels. The deals take longer, dilute you more and impose more onerous conditions.
  • VCs form a pyramid. There are a few famous ones and a large number you haven’t heard of. 
  • Be sceptical about claims of experience and connections, especially as you go lower down the hierarchy
  • “I'd be inclined to go with whoever offered the most money the soonest with the least strings attached.”
  • Don’t be overly secretive with VCs, but don’t tell them everything either – they may fund your competitors one day. 
  • “Talk to as many VCs as you can, even if you don't want their money, because a) they may be on the board of someone who will buy you, and b) if you seem impressive, they'll be discouraged from investing in your competitors”.
  • Not spending it
  • “To make something users love, you have to understand them. And the bigger you are, the harder that is. So I say "get big slow."”
  • Once you get big (in users or employees) it gets hard to change your product.
  • Encourage a culture of cheapness
  • Money from a VC firm is not revenue, so recognise that your company is not “rich”.
  • “I'd advise most startups to avoid corporate space at first and just rent an apartment.”
  • Location is important. You want to be in a place where there are lots of restaurants around, so you can go to dinner, discuss ideas and go back and work.
  • People are a recurring expense – “the fewer people you can hire, the better”
  • Should you?
  • Who should start a startup? Someone who is...
  • A good hacker (programmer)
  • Between 23 and 38 (although PG revises this view in later essays)
    • Lower bound at 23 because it is good to get experience at an existing business before you start your own. 
    • Startups are a big risk financially and as you get older it gets harder to take such risks. 
  • Someone who wants to solve the money problem in one shot instead of gradually getting paid over a lifetime. 
    • “Instead of working at an ordinary rate for 40 years, you work like hell for four. And maybe end up with nothing – though in that case it probably won’t take four years.”
    • During this time you’ll do little but work
  • “Build something users love, and spend less than you make. How hard is that?”

Wildcard: Cities and Ambition (May 2008)
http://www.paulgraham.com/cities.html
This is not really to do with the realm of startups, but it’s my favourite essay of Paul Graham’s. Broadly it is about the messages that different cities send, and how powerful a factor these can be.

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