7 lessons some startups seem quicker to learn

• September 1, 2022

Some startups seem quicker to learn some lessons than others.

Paul Graham, author, entrepreneur, and venture capitalist claims he learned a trick for determining which points are the counterintuitive ones for startups. Here are some of his learned lessons:

1. Release Early

Get version 1 out fast, then improve it based on users’ reactions.

By “release early” he doesn’t mean you should release something full of bugs, but that you should release something minimal. Users hate bugs, but they don’t seem to mind a minimal version 1 if there’s more coming soon.

There are several reasons it pays to get version 1 done fast. One is that this is simply the right way to write software, whether for a startup or not.  A lot of startups die because they were too slow to release stuff, and none because they were too quick.

One of the things that will surprise you if you build something popular is that you won’t know your users.

Even if you had no users, it would still be important to release quickly, because for a startup the initial release acts as a shakedown cruise. If anything major is broken– if the idea’s no good, for example, or the founders hate one another– the stress of getting that first version out will expose it. And if you have such problems you want to find them early.

Perhaps the most important reason to release early, though, is that it makes you work harder. When you’re working on something that isn’t released, problems are intriguing. In something that’s out there, problems are alarming. There is a lot more urgency once you release.

2. Keep Pumping Out Features

Of course, “release early” has a second component, without which it would be bad advice. If you’re going to start with something that doesn’t do much, you better improve it fast and “pump out features”. This is something all startups should do for as long as they want to be considered startups. By “feature” it is meant one unit of hacking– one quantum of making users’ lives better. The more ideas you implement, the more ideas you’ll have. You should make your system better at least in some small way every day or two.

This is not just a good way to get development done; it is also a form of marketing. Users love a site that’s constantly improving.

They’ll like you even better when you improve in response to their comments, because customers are used to companies ignoring them. If you’re the rare exception– a company that actually listens– you’ll generate fanatical loyalty. You won’t need to advertise, because your users will do it for you.

Force yourself, as a sort of intellectual exercise, to keep thinking of improvements. Ok, sure, what you have is perfect. But if you had to change something, what would it be?

If your product seems finished, there are two possible explanations: (a) it is finished, or (b) you lack imagination. Experience suggests (b) is a thousand times more likely.

3. Make Users Happy

Improving constantly is an instance of a more general rule: make users happy.

When you’re running a startup you feel like a little bit of debris blown about by powerful winds. The most powerful wind is users. They can either catch you and loft you up into the sky, as they did with Google, or leave you flat on the pavement, as they do with most startups. Users are a fickle wind, but more powerful than any other. If they take you up, no competitor can keep you down.

There are two things you have to do to make people pause. The most important is to explain, as concisely as possible, what your startup is about. How often have you visited a site that seemed to assume you already knew what they did?

For example, the corporate site says: ‘the company makes enterprise content management solutions for businesses that enable organisations to unify people, content, and processes to minimize business risk, accelerate time-to-value and sustain a lower total cost of ownership.’

An established company may get away with such an opaque description, but no startup can. A startup should be able to explain in one or two sentences exactly what it does.  And not just to users. You need this for everyone: investors, acquirers, partners, reporters, potential employees, and even current employees. You probably shouldn’t even start a company to do something that can’t be described compellingly in one or two sentences.

Give people everything you’ve got, right away. If you have something impressive, try to put it on the front page, because that’s the only one most visitors will see. Though indeed there’s a paradox here: the more you push the good stuff toward the front, the more likely visitors are to explore further.

In the best case these two suggestions get combined: you tell visitors what your site is about by showing them. One of the standard pieces of advice in fiction writing is “show, don’t tell.” Don’t say that a character’s angry; have him grind his teeth, or break his pencil in half. Nothing will explain what your site does so well as using it.

The industry term here is “conversion.” The job of your site is to convert casual visitors into users– whatever your definition of a user is. You can measure this in your growth rate. Either your site is catching on, or it isn’t, and you must know which. If you have decent growth, you’ll win in the end, no matter how obscure you are now. And if you don’t, you need to fix something.

4. Fear the Right Things

Startups are right to be paranoid, but they sometimes fear the wrong things.

Most visible disasters are not as alarming as they seem. Disasters are normal in a startup: a founder quits, you discover a patent that covers what you’re doing, your servers keep crashing, you run into an insoluble technical problem, you have to change your name, a deal falls through– these are all par for the course. They won’t kill you unless you let them.

Nor will most competitors. A lot of startups worry “what if Google builds something like us?” Actually, big companies are not the ones you have to worry about– not even Google. The people at Google are smart but no smarter than you; they’re not as motivated, because Google is not going to go out of business if this one product fails; and even at Google they have a lot of bureaucracy to slow them down.

What you should fear, as a startup, is not the established players, but other startups you don’t know exist yet. They’re way more dangerous than Google because, like you, they’re cornered animals.

Looking just at existing competitors can give you a false sense of security. You should compete against what someone else could be doing, not just what you can see people doing. No matter what your idea, there’s someone else out there working on the same thing.

And in any case, competitors are not the biggest threat. Way more startups hose themselves than get crushed by competitors. There are a lot of ways to do it, but the three main ones are internal disputes, inertia, and ignoring users. Each is, by itself, enough to kill you.  If you want a recipe for a startup that’s going to die, here it is: a couple of founders who have some 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. In both cases their customers told them what their business should be– and they were smart enough to listen.

As Richard Feynman said, the imagination of nature is greater than the imagination of man. You’ll find more interesting things by looking at the world than you could ever produce just by thinking. This principle is very powerful. No idea for a product could ever be so clever as the ones you can discover by smashing a beam of prototypes into a beam of users.

5. Commitment Is a Self-Fulfilling Prophecy

The most important quality in a startup founder is determination. Not intelligence– determination.

Time after time VCs invest in startups founded by eminent professors. This may work in biotech, where a lot of startups simply commercialize existing research, but in software, you want to invest in students, not professors. Microsoft, Yahoo, and Google were all founded by people who dropped out of school to do it. What students lack in experience they more than makeup in dedication.

It’s not enough merely to be determined. You have to be smart too, right?

You can lose quite a lot in the brains department and it won’t kill you. But losing even a little bit in the commitment department, and that will kill you very rapidly.

Running a startup is like walking on your hands: it’s possible, but it requires extraordinary effort. If an ordinary employee were asked to do the things a startup founder has to, he’d be very indignant. Imagine if you were hired at some big company, and in addition to writing software ten times faster than you’d ever had to before, they expected you to answer support calls, administer the servers, design the web site, cold-call customers, find the company office space, and go out and get everyone lunch.

And to do all this not in the calm, womb-like atmosphere of a big company, but against a backdrop of constant disasters. That’s the part that really demands determination. In a startup, there’s always some disaster happening. So if you’re the least bit inclined to find an excuse to quit, there’s always one right there.

But if you lack commitment, chances are it will have been hurting you long before you actually quit.  If you lack commitment, you’ll just find that for some mysterious reason good things happen to your competitors but not to you. If you lack commitment, it will seem to you that you’re unlucky.

At Y Combinator we sometimes mistakenly fund teams who have the attitude that they’re going to give this startup thing a shot for three months, and if something great happens, they’ll stick with it– “something great” meaning either that someone wants to buy them or invest millions of dollars in them. But if this is your attitude, “something great” is very unlikely to happen to you, because both acquirers and investors judge you by your level of commitment.

Paul Graham

If an acquirer thinks you’re going to stick around no matter what, they’ll be more likely to buy you because if they don’t and you stick around, you’ll probably grow, your price will go up, and they’ll be left wishing they’d bought you earlier. Ditto for investors. What really motivates investors, even big VCs, is not the hope of good returns, but the fear of missing out. So if you make it clear you’re going to succeed no matter what, and the only reason you need them is to make it happen a little faster, you’re much more likely to get money.

You can’t fake this. The only way to convince everyone that you’re ready to fight to the death is actually to be ready to.

You have to be the right kind of determined, though. I carefully chose the word determined rather than stubborn because stubbornness is a disastrous quality in a startup. You have to be determined, but flexible, like a running back. A successful running back doesn’t just put his head down and try to run through people. He improvises: if someone appears in front of him, he runs around them; if someone tries to grab him, he spins out of their grip; he’ll even run in the wrong direction briefly if that will help. The one thing he’ll never do is stand still.

6. There Is Always Room

There is always room for new stuff. At every point in history, even in the darkest bits of the dark ages, people were discovering things that made everyone say “why didn’t anyone think of that before?”

The reason we don’t see the opportunities all around us is that we adjust to however things are and assume that’s how things have to be. For example, it would seem crazy to most people to try to make a better search engine than Google. Surely that field, at least, is tapped out. Really? In a hundred years– or even twenty– are people still going to search for information using something like the current Google? Even Google probably doesn’t think that.

Sometimes you hear people saying “All these guys starting startups now are going to be disappointed. How many little startups are Google and Yahoo going to buy, after all?” That sounds cleverly skeptical, but I can prove it’s mistaken. No one proposes that there’s some limit to the number of people who can be employed in an economy consisting of big, slow-moving companies with a couple thousand people each. Why should there be any limit to the number who could be employed by small, fast-moving companies with ten each? It seems to me the only limit would be the number of people who want to work that hard.

The limit on the number of startups is not the number that can get acquired by Google and Yahoo– though it seems even that should be unlimited, if the startups were actually worth buying– but the amount of wealth that can be created.

So for all practical purposes, there is no limit to the number of startups. Startups make wealth, which means they make things people want, and if there’s a limit on the number of things people want, we are nowhere near it.

7. Don’t Get Your Hopes Up

Startup founders are naturally optimistic. They wouldn’t do it otherwise. But you should treat your optimism the way you’d treat the core of a nuclear reactor: as a source of power that’s also very dangerous. You have to build a shield around it, or it will fry you.

 The place to draw the line is between what you expect of yourself, and what you expect of other people. It’s ok to be optimistic about what you can do, but assume the worst about machines and other people.

This is particularly necessary for a startup because you tend to be pushing the limits of whatever you’re doing. So things don’t happen in the smooth, predictable way they do in the rest of the world. Things change suddenly, and usually for the worse.

Shielding your optimism is nowhere more important than with deals. If your startup is doing a deal, just assume it’s not going to happen. The VCs who say they’re going to invest in you aren’t. The company that says they’re going to buy you isn’t. The big customer who wants to use your system in their whole company won’t. Then if things work out you can be pleasantly surprised.

For example, if someone says they want to invest in you, there’s a natural tendency to stop looking for other investors. That’s why people proposing deals seem so positive: they want you to stop looking. And you want to stop too because doing deals is a pain. Raising money, in particular, is a huge time-sink. So you have to consciously force yourself to keep looking.

Even if you ultimately do the first deal, it will be to your advantage to have kept looking, because you’ll get better terms. Deals are dynamic; unless you’re negotiating with someone unusually honest, there’s not a single point where you shake hands and the deal’s done. There are usually a lot of subsidiary questions to be cleared up after the handshake, and if the other side senses weakness– if they sense you need this deal– they will be very tempted to screw you in the details.

VCs and corp dev guys are professional negotiators. They’re trained to take advantage of weaknesses. So while they’re often nice guys, they just can’t help it. And as pros, they do this more than you. So don’t even try to bluff them. The only way a startup can have any leverage in a deal is genuinely not to need it. And if you don’t believe in a deal, you’ll be less likely to depend on it.

When you hear someone say the words “we want to invest in you” or “we want to acquire you,” the following phrase should appear automatically in your head: don’t get your hopes up. Just continue running your company as if this deal didn’t exist. Nothing is more likely to make it close.

The way to succeed in a startup is to focus on the goal of getting lots of users and keep walking swiftly toward it while investors and acquirers scurry alongside trying to wave money in your face.

This article is sourced from Paul Graham’s website.

About

Paul Graham (born 1964) is an English-born American computer scientist, essayist, entrepreneur, venture capitalist, and author. He is best known for his work on the programming language Lisp, his former startup Viaweb (later renamed Yahoo! Store), co-founding the influential startup accelerator and seed capital firm Y Combinator, his blog, and Hacker News. He is the author of several computer programming books, including: On Lisp, ANSI Common Lisp, and Hackers & Painters. Technology journalist Steven Levy has described Graham as a “hacker philosopher”.

Y Combinator (YC) is an American technology startup accelerator launched in March 2005. It has been used to launch more than 3,000 companies,[2] including Airbnb, Coinbase, Cruise, DoorDash, Dropbox, Instacart, Quora, PagerDuty, Reddit, Stripe and Twitch. The combined valuation of the top YC companies was more than $300 billion by January 2021. The company’s accelerator program started in Boston and Mountain View expanded to San Francisco in 2019 and has been entirely online since the start of the COVID-19 pandemic. Forbes characterized the company in 2012 as one of the most successful startup accelerators in Silicon Valley.