I've noticed Paul Graham's name popping up a lot recently in the blogs I read. I wonder if it is just the new car phenomenon. Have you ever noticed that when you buy a new car, you see a lot more of them on the road? Suddenly it feels like everyone is driving a Prius (actually, in the Bay Area, everyone is driving a Prius). Well Paul Graham is my new car (sorry, Paul, I realize this is a pretty dubious analogy). I had long heard great things about Paul Graham but had not had the opportunity to meet him until a couple weekends ago at FOO Camp. After having the pleasure of hearing Paul speak, "presenting" with Paul and just plain old chatting with him, I am now a card carrying member of the Paul Graham fan club. But now, everywhere I turn, people are singing Paul's praises. Paul is today's Prius.
Paul gave a fabulous talk at FOO Camp about entrepreneurship entitled "What We Learned So Far From Y Combinator About Startups." Paul and his partners run a program called Y Combinator which is part incubator, part angel investment fund, part startup boot camp, part summer camp. Since starting the program, Y Combinator has funded 27 embryonic companies (usually at least two people strong because, as Paul points out, what does it say about you as an entrepreneur if you can't even convince at least one other person to work with you). While applicants for the Y Combinator program are technically applying for funding, as Paul rightfully points out, the most valuable thing that they are getting out of the program is advice. Paul and his partners aren't so much VCs and VAs -- Venture Advisors. And through 27 companies worth of advice, Paul has distilled a thing or two about what makes a successful startup.
As an initial matter, in his FOO talk, Paul pointed out that startup success is really just the absence of startup failure -- in Paul's own words, "to a large extent you can succeed in a startup by simply not failing." Easier said than done, right? You bet. The vast majority of startups fail. But Paul points to the biggest weapon entrepreneurs have against failing, and that is focus and determination. Paul has seen astoundingly smart people fail because they lacked the maniacal focus required to help a startup succeed against the odds. In fact, Paul goes so far as to say that smart isn't that important. There are lots of smart people. To him, smart pales in comparison to focus.
The second key to successful company building, according to Paul, is to start with the right product. The Y Combinator t-shirts read "Make Something People Want." Again, easier said than done. But, as Paul notes, the easiest way to make something that people want is to make something that you want. Yahoo! started out as a directory of Jerry and Dave's favorite links. Movable Type was born out of Mena's need for a better way to talk about herself. Jonathan started Friendster to find a girlfriend. Zuckerberg started FaceBook to find a girlfriend. Joe and Alon started JDate to find Jewish girlfriends. Ted started Dogster to find his dog a date. If you build something you want, chances are pretty good that someone else will want it as well. That has proven true time and time again -- from Apple to Google to Noah's Bagels.
The corollary to "build something you want" is to build something you know others will want. This is harder. It is a unique but powerful skill to have what I'd call "product empathy." It requires a lot of listening and a lot of luck. Happening upon the right product idea for other people is even harder than happening upon the right product idea for yourself. I think one of the biggest problems in the late 90's was that McKinsey people decided to quit consulting and went out looking for problems to solve. They either knew too little to actually solve the problems or didn't actually find a real problem to solve. Truly successful startups solving other people's problems are often started by domain experts who see big problems with the status quo and leave their industries to go solve those problems. That might work. But it is still really hard. It's a lot easier to really understand your own problems than someone else's.
A third characteristic of successful startups according to Paul is the ability to listen and react. Even companies building something that the founders themselves want need to listen to feedback on their product in order to morph their idea to appeal to the largest (or most valuable) constituency possible. As Paul points out, it is OK to be stubborn and have good judgment but it is better still to not be stubborn, even if you have bad judgment (obviously it is best to not be stubborn and have good judgment, and to complete the 2 by 2 matrix -- are you picturing it? -- it is death to be stubborn and have bad judgment). I can't think of a single startup in which I've invested or advised that ultimately built the exact product that the founders had originally envisioned. Startups are necessarily fluid and agile. It is what gives them a chance of succeeding despite the long odds and giant competitors.
Paul had some other great thoughts on what makes successful startup founders. I will have to save that for another day. In his FOO talk, Paul laughingly noted, "you can get surprisingly far by being selfish." It seems to me that Paul has chosen to be anything but. Rather than build an Eco-Yacht or sit by the pool, Paul has chosen to share what he has learned building his own successful venture with a new generation of entrepreneurs. That's lucky for the entrepreneurs and VCs alike. I look forward to spending more time with Paul in the near future and continuing to learn more from his experiences. Maybe I should apply to Y Combinator.