A Lecture on All Things Startups from Paul Graham on the Startup School by Y Combinator Podcast

Check out the Startup School by Y Combinator Episode Page & Show Notes

Key Takeaways

  • The trait that matters most among the co-founders you choose: trustworthiness 
  • In the beginning of your journey as a startup, do things that don’t scale
    • One way to do this – talk to your early users
  • 99% of the time, having a team of co-founders > being a solo founder
  • One of the most common mistakes startup founders make: Not paying enough attention to their users
  • How do you know when it’s time to launch?
    • “Launch as soon as you have a quantum of utility, which means as soon as there’s ONE person in the world who’s glad you launched because now they can do something they couldn’t do before”Paul Graham
    • “The risk of launching early is not as great as the risk of launching late” – Paul Graham 

Intro

It’s Not a Light Bulb

  • “In retrospect, ideas seem obvious. Historians who weren’t there straighten out all the kinks in their development… I always hate it when people represent startup ideas as light bulbs; as well it being the most cliched metaphor imaginable, it’s also false!”Paul Graham

How do you know when an idea has potential?

  • You don’t – it’s that simple
    • Pursue a startup idea for the fun of it, expecting it to fail, but with full belief that it won’t. And when something works, double down. That’s the formula.
  • “It’s not just that the outcomes of startups are hard to predict. To some degree, they’re actually indeterminate. There’s a huge amount of luck involved.” – Paul Graham

How to Pick Your Co-founders

  • No matter what, the trait that’ll matter more than anything else – trustworthiness

In the Beginning, Do Things That Don’t Scale

  • For background, read Paul’s essay on this topic
  • What exactly does this mean?
    • “Doing things in a hand-made, artisanal, pain-staking way… In the back of your mind, you’re thinking, ‘There’s no way we could keep doing this and become giant.’ What ‘do things that don’t scale’ means is do those things anyway. If you don’t do them, you’ll never be big… And you learn a lot from it.”Paul Graham
  • One example of something that doesn’t scale: Doing things manually for your early customers
    • “It’s so important to get early customers that if you have to do a ton of manual stuff, it’s okay. You’ll learn a lot from it.” – Paul Graham
  • Another example: Talk to your early users
    • This certainly doesn’t scale, but doing so is super valuable 

Being a Solo Founder is Difficult

  • “I think the hardest part is morale. If you have multiple people, they all keep each other going when things are going badly. If you’re a solo founder, there’s no one to cheer you up.” Paul Graham
  • “Being a solo founder is hard. It’s hard because there are a million reasons why what you’re doing isn’t going to work… and most of them are right. It’s easy to convince yourself of that.” – Geoff Ralston
    • But with other people on your team, you’re much more likely to persevere those difficulties

What makes companies fail?

  • “What makes company’s fail, most of the time, is poor execution by the founders” Paul Graham
  • NOT competition 
    • “I tell startups that basically you have the same protection against competitors that light aircraft have against crashing into other light aircraft when flying through clouds” – Paul Graham
      • “It’s sort of like if you’re running a 100-meter race, and suddenly there appears another lane with another runner in it. What should you do? Run as fast as you can, just like you presumably were.”

What makes startups succeed?

  • First, it takes a solid founding team who know one another well and can easily work together (you can do it solo, but it’s much more difficult)
    • “I would not try to start a startup with just myself as the founder. I don’t think I could do it.” – Paul Graham
    • Why do you have to know one another well?
      • “What happens in a startup will shake your relationship. If there’s any sort of flakiness, or uncertainty, or disloyalty lingering, it will emerge under the stresses of a startup.” – Paul Grama
  • It’s undoubtedly essential for founders to be intelligent, but: “It’s much, much more important to be determined” – Paul Graham

What are some common startup mistakes?

  • Not paying enough attention to users; people tend to get too hooked on their vision without incorporating user feedback
    • “You’d be much better off finding someone, anyone, who has a problem that they will pay you to fix, and fixing it, and then seeing if you can find more people like that. Of course, the best case is if you yourself have the problem.” – Paul Graham 

How do you deal with different co-founder commitment levels?

  • Simply ask yourself: “Would I rather have 30% [or whatever %] of this person or 100% of some other person?”

Just LAUNCH

  • Reid Hoffman has famously said: “If you’re not embarrassed by what you launched, you launched too late.”
  • “The risk of launching early is not as great as the risk of launching late”Paul Graham
  • 🎧 “Launch as soon as you have a quantum of utility, which means as soon as there’s ONE person in the world who’s glad you launched because now they can do something they couldn’t do before”Paul Graham
    • “If there are 10 people who are super excited, totally, totally launch. Even if no one else cares, that’s perfectly fine. That’s great.”

Tips for a Great User Interview

  • Start by asking them what’s wrong
    • “You want to figure out not just what they think is wrong, but what’s actually wrong, what’s missing in their life. Just start talking to them. Say, ‘What would you like to be able to do that you can’t.'” – Paul Graham
  • Then, ask them the “What if?” questions
    • For example: “What if you could do X?”

What makes a good founder?

  • 🎧 “If you’ve worked for a large company for 20 years, you might not be a founder, unless you were forced to for visa reasons, because, if you were the type of person who would make a good founder, you couldn’t stand working for a large company for 20 years”Paul Graham

When you launch a new product, how do you know what to charge?

  • Go with your gut – don’t sweat about it too much
  • 🎧 “In the beginning, what you need more than anything is customers. You want them to pay, so you need to pick a price that gets you customers because you learn so much from them.” Geoff Ralston
    • “The first customers don’t just give you money, they teach you” – Paul Graham

How do you meet angel investors?

  • “The best way to meet angel investors is to get one to invest in your startup and have them introduce you to other angel investors” – Geoff Ralston
  • Or, simply, find people who work at startups and ask them to introduce you to their investors

Additional Notes

  • “Startups, in general, are very, very counterintuitive… That would be worth writing an essay about.” – Paul Graham 
  • “I don’t think we’d fund a Steve Jobs at YC… The reason is, especially when Steve Jobs was starting off, he was an asshole.” – Geoff Ralston