October 2014
(This essay is derived from a guest lecture in Sam Altman's startup class at Stanford. It's intended for college students, but much of it is applicable to potential founders at other ages.)
One of the advantages of having kids is that when you have to give advice, you can ask yourself "what would I tell my own kids?" 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.Startups are very counterintuitive. I'm not sure why.
Maybe it's just because knowledge about them hasn't permeated our culture yet. But whatever the reason, starting a startup is a task where you can't always trust your instincts.It's like skiing in that way.
When you first try skiing and you want to slow down, your instinct is to lean back. But if you lean back on skis you fly down the hill out of control. So part of learning to ski is learning to suppress that impulse.
Eventually you get new habits, but at first it takes a conscious effort. At first there's a list of things you're trying to remember as you start down the hill.Startups are as unnatural as skiing, so there's a similar list for startups. Here I'm going to give you the first part of it — the things to remember if you want to prepare yourself to start a startup.
Counterintuitive
The first item on it is the fact I already mentioned: that startups are so weird that if you trust your instincts, you'll make a lot of mistakes. If you know nothing more than this, you may at least pause before making them.
When I was running Y Combinator I used to joke that our function was to tell founders things they would ignore. It's really true. Batch after batch, the YC partners warn founders about mistakes they're about to make, and the founders ignore them, and then come back a year later and say "I wish we'd listened."
Why do the founders ignore the partners' advice? Well, that's the thing about counterintuitive ideas: they contradict your intuitions. They seem wrong. So of course your first impulse is to disregard them.
And in fact my joking description is not merely the curse of Y Combinator but part of its raison d'etre. If founders' instincts already gave them the right answers, they wouldn't need us. You only need other people to give you advice that surprises you. That's why there are a lot of ski instructors and not many running instructors. [1]
You can, however, trust your instincts about people. And in fact one of the most common mistakes young founders make is not to do that enough. They get involved with people who seem impressive, but about whom they feel some misgivings personally.
Later when things blow up they say "I knew there was something off about him, but I ignored it because he seemed so impressive."If you're thinking about getting involved with someone — as a cofounder, an employee, an investor, or an acquirer — and you have misgivings about them, trust your gut.
If someone seems slippery, or bogus, or a jerk, don't ignore it.This is one case where it pays to be self-indulgent. Work with people you genuinely like, and you've known long enough to be sure.
Expertise
The second counterintuitive point is that it's not that important to know a lot about startups. The way to succeed in a startup is not to be an expert on startups, but to be an expert on your users and the problem you're solving for them.
Mark Zuckerberg didn't succeed because he was an expert on startups. He succeeded despite being a complete noob at startups, because he understood his users really well.
If you don't know anything about, say, how to raise an angel round, don't feel bad on that account. That sort of thing you can learn when you need to, and forget after you've done it.In fact, I worry it's not merely unnecessary to learn in great detail about the mechanics of startups, but possibly somewhat dangerous.
If I met an undergrad who knew all about convertible notes and employee agreements and (God forbid) class FF stock, I wouldn't think "here is someone who is way ahead of their peers."
It would set off alarms. Because another of the characteristic mistakes of young founders is to go through the motions of starting a startup.
They make up some plausible-sounding idea, raise money at a good valuation, rent a cool office, hire a bunch of people. From the outside that seems like what startups do. But the next step after rent a cool office and hire a bunch of people is: gradually realize how completely fucked they are, because while imitating all the outward forms of a startup they have neglected the one thing that's actually essential: making something people want.
Game
We saw this happen so often that we made up a name for it: playing house. Eventually I realized why it was happening.
The reason young founders go through the motions of starting a startup is because that's what they've been trained to do for their whole lives up to that point. Think about what you have to do to get into college, for example. Extracurricular activities, check.
Even in college classes most of the work is as artificial as running laps.I'm not attacking the educational system for being this way.
There will always be a certain amount of fakeness in the work you do when you're being taught something, and if you measure their performance it's inevitable that people will exploit the difference to the point where much of what you're measuring is artifacts of the fakeness.I confess I did it myself in college. I found that in a lot of classes there might only be 20 or 30 ideas that were the right shape to make good exam questions.
The way I studied for exams in these classes was not (except incidentally) to master the material taught in the class, but to make a list of potential exam questions and work out the answers in advance. When I walked into the final, the main thing I'd be feeling was curiosity about which of my questions would turn up on the exam. It was like a game.
It's not surprising that after being trained for their whole lives to play such games, young founders' first impulse on starting a startup is to try to figure out the tricks for winning at this new game. Since fundraising appears to be the measure of success for startups (another classic noob mistake), they always want to know what the tricks are for convincing investors.
We tell them the best way to convince investors is to make a startup that's actually doing well, meaning growing fast, and then simply tell investors so. Then they want to know what the tricks are for growing fast. And we have to tell them the best way to do that is simply to make something people want.
