Paul Graham is a co-founder of Y Combinator, a startup accelerator in Mountain View, California. He is also a programmer, venture capitalist, and essayist. He’s also written some great books too. He is a god of Silicon Valley. We spent an hour diving into his work in Episode 46.
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He is well-known for his thoughtful Start Essays. 'Beating the Averages' is considered on his best essays for founders. The essay showcased the Blub paradox and how to think about programming languages.
Before I share his startup ideas, it's important to understand why we should listen to Graham. He is the founder of Y Combinator (YC) is the leading global startup accelerator. You've probably heard of their famous 'Demo Days' which have been running since 2005. In short, they know startups!
They have a small amount of equity and a big number of startups. Ycombinator has helped over 2,000 companies, including Stripe, Airbnb, Cruise Automation, DoorDash, Coinbase, Instacart, Dropbox, Twitch, and Reddit. When you take these 2000 companies and combine their valuation they are worth over US$300 billion as of January 2021.
Why is Ycombinator so successful?
The accelerator did a few things to create their success:
They invested in a lot of companies 2000+
They standardized anything they could docs, deal equity %, and $$ offered
They created network effects with their community
We did a deep looking the wisdom of Paul Graham and Ycombinator in Episode 46. Here's a summary of why we learnt:
How to Get Startup Ideas
Graham's advice is to go in search of problems.
"The way to get startup ideas is not to try to think of startup ideas. It's to look for problems, preferably problems you have yourself. The very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing. Microsoft, Apple, Yahoo, Google, and Facebook all began this way."
Paul Graham
A Startup Will Take Over Your Life So Wait
Most people think Startups a young persons game. Graham suggests otherwise.
"There's not even a tradeoff here. You're not sacrificing anything if you forgo starting a startup at 20, because you're more likely to succeed if you wait. In the unlikely case that you're 20 and one of your side projects takes off like Facebook did, you'll face a choice of running with it or not, and it may be reasonable to run with it. But the usual way startups take off is for the founders to make them take off, and it's gratuitously stupid to do that at 20." Paul Graham
Succeed Through Expertise in Users
We love the idea that Graham makes startups focus on the user. Here is how important users were in the early days of Airbnb.
"Airbnb now seems like an unstoppable juggernaut, but early on it was so fragile that about 30 days of going out and engaging in person with users made the difference between success and failure." Paul Graham
The Magic In a Team
We continue to learn from the like of Steve Jobs that small teams succeed more than large teams. Here's Graham's advice on building a kick-ass team.
"If anything, it's more like the first five. Being small is not, in itself, what makes startups kick butt, but rather that small groups can be select. You don't want small in the sense of a village, but small in the sense of an all-star team." Paul Graham
The Founder Is More Important Than The Idea
Creating a new startup is a tough rough. And it's the people, not the idea, that will get the team through the rough times. Here's Graham's advice:
"Determination has turned out to be the most important quality in startup founders. We thought when we started Y Combinator that the most important quality would be intelligence. That's the myth in the Valley. And certainly, you don't want founders to be stupid. But as long as you're over a certain threshold of intelligence, what matters most is determination. You're going to hit a lot of obstacles. You can't be the sort of person who gets demoralized easily." Paul Graham
How Does A Startup Succeed
Graham has a simple list of three things you need for a successful startup:
"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. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed." Paul Graham
Do Things Manually
Growing users is done one by one in the early days. It's also going to be a very manual process. But that's OK according to Graham.
"The most common unscalable thing founders have to do at the start is to recruit users manually. Nearly all startups have to. You can't wait for users to come to you. You have to go out and get them.
You'll be doing different things when you're acquiring users a thousand at a time, and growth has to slow down eventually. But if the market exists you can usually start by recruiting users manually and then gradually switch to less manual methods." Paul Graham
What Kills Startups
The final wisdom from Paul that I want to share is about what kills a startup
"In a sense there's just one mistake that kills startups: not making something users want. If you make something users want, you'll probably be fine, whatever else you do or don't do. And if you don't make something users want, then you're dead, whatever else you do or don't do. So really this is a list of 18 things that cause startups not to make something users want. Nearly all failure funnels through that." Paul graham
