If you're thinking of taking the plunge into your own start-up, you might want to take a few notes from the guy who wrote the book on the process, and how to get it right.
By David Walker
Venture capitalist Paul Graham is famous for his ability to pick apart the things that make technology start-ups succeed or fail.
He was involved in an early start-up success himself, as co-founder of website maker Viaweb, acquired by Yahoo in 1998. He then co-founded the successful Y Combinator, a company that both invests in and nurtures new start-ups.
Y Combinator’s successes include Dropbox, Airbnb, Stripe, Reddit, Optimizely, Scribd and Heroku.
Here, culled from Graham’s essays at paulgraham.com – and covering more than a decade of his thoughts – are 10 ideas on internet start-ups.
Build something you want
Great start-up ideas don’t usually come from people trying to think up a great start-up idea. Rather, they come from people who want to have something that doesn’t yet exist – typically, something that not many people think is worth making. Then, when they do make it, it turns out that everyone wants it.
“Microsoft, Apple, Yahoo, Google and Facebook all began this way,” Graham notes. Only a few people (notably, Amazon’s Jeff Bezos) have been able to create hugely successful internet start-ups without knowing how to code.
Offer “surprisingly good” customer service
Customers are used to poor service, so good service – service that you couldn’t afford to offer on a large scale – engages users and helps you learn about them.
Don’t obsess about the competition
Graham believes competition is less important than many start-up founders think. Good ideas tend to seem obvious, so you naturally fear that your competitors will make your idea a reality before you can. Ignore that fear. Your success will usually depend far more on your efforts than on what any potential competitors are doing.
Do your start-up with friends
Graham argues that very few successful start-ups were founded by just one person: think Bill Gates and Paul Allen, or Steve Jobs and Steve Wozniak. That’s no coincidence, he suggests.
“Starting a start-up is too hard for one person. Even if you could do all the work yourself, you need colleagues to brainstorm with, to talk you out of stupid decisions and to cheer you up when things go wrong … When you have multiple founders … each thinks, ‘I can't let my friends down.’”
Launch your product as soon as possible
By getting your product out into the marketplace, you can engage with users and find out what they really want and what they don’t. “Launching teaches you what you should have been building.”
6 lessons from software start-ups
Make profit your priority
Graham argues for working on projects you like, but he insists you should aim to make money from them. On his first start-up, he made the mistake of not committing to profit.
“When we started Artix [an art gallery site], I was ambivalent about business. Big, big, mistake. Going into business is like a hang-glider launch: you'd better do it wholeheartedly or not at all. If you're starting a company that will do something cool, the aim had better be to make money and maybe be cool, not to be cool and maybe make money.
"It's hard enough to make money that you can't do it by accident. Unless it’s your first priority, it’s unlikely to happen at all.”
Make a few users very happy
Aim to create something that makes a small group of users very happy, as opposed to just satisfying some of the needs of a larger user group. Understanding your users will push you toward this.
Evolve your product
It’s extremely rare that start-ups get it right the first time. Let your users tell you what they like and don’t like. Then make changes and go again.
“If you want a recipe for a start-up that's going to die, here it is: a couple of founders who have a great idea they know everyone is going to love, and that's what they're going to build, no matter what. Almost everyone's initial plan is broken. If companies stuck to their initial plans, Microsoft would be selling programming languages and Apple would be selling printed circuit boards. Their customers told them what their business should be – they were smart enough to listen.”
Use programmers to manage programmers
If you’re not a programmer, says Graham, you will struggle to know who’s doing good programming and to insist on the right things.
“I've seen articles about how to manage programmers. Really, there should be two articles: one about what to do if you are yourself a programmer and one about what to do if you’re not. The second could be condensed into two words: give up.”
Learn how to develop your strategic thinking skills
Know your users
If you want to do a start-up, Graham says your biggest challenge is finding something new that users want and don’t have. If you can understand users better, you’ll raise your chances of finding that thing.
“That's why so many successful start-ups make something the founders needed,” he notes. The flip side of this is that the most common start-up mistake is “to solve problems no-one has”.
“The essential task in a start-up is to create wealth. The dimension of wealth you have most control over is how much you improve users’ lives; the hardest part of that is knowing what to make for them. Once you know what to make, it’s mere effort to make it, and most decent hackers are capable of that.”
From lame to fame
One of Paul Graham’s favourite observations is that great start-ups don’t seem that great at first. To understand start-ups, he suggests, you should look at the first months of the most successful companies, “because they practically all seemed lame at first – not just small, lame”. His examples include:
Its first product (as Micro-soft) was an interpreter for the BASIC programming language that ran on the Altair 8800 microcomputer, itself an obscure product in 1978.
Its original idea was that people could sleep on air beds in strangers' apartments (hence the name – “air bed and breakfast”).
The Facebook, as it was first known, started as “a website for college students to stalk one another”, says Graham.
Its first product was a seemingly underpowered single-board computer that used a TV as a monitor. Buyers had to find or make their own case.
Originally called BackRub, it launched in 1997 as a new search engine at a time when dominant search engines such as AltaVista and Excite were trying to downplay the boring business of website searching.
5 innovative start-ups founded by women