Bill Krueger's List: Paul Graham Essays

• The way a startup makes money is to offer people better technology than they have now.
• What matters is not ideas, but the people who have them. Good people can fix bad ideas, but good ideas can't save bad people.
• Ideally you want between two and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear.
• If you can't understand users, however, you should either learn how or find a co-founder who can. That is the single most important issue for technology startups, and the rock that sinks more of them than anything else.
• A 10% improvement in ease of use doesn't just increase  your sales 10%. It's more likely to double your sales.
• If you want ideas for startups, one of the most valuable things you could do is find a middle-sized non-technology company and spend a  couple weeks just watching what they do with computers. Most good hackers have no more idea of the horrors perpetrated in these places than rich Americans do of what goes on in Brazilian slums.
• Financially, a startup is like a pass/fail course. The way to get rich from a startup is to maximize the company's chances of succeeding, not to maximize the amount of stock you retain. So if you can trade stock for something that improves your odds, it's probably a smart  move.
• When everyone feels they're getting a slightly bad deal, that they're doing more than they should for the amount of stock they have, the stock is optimally apportioned.
• Once you've got a company set up, it may seem presumptuous to go knocking on the doors of rich people and asking them to invest tens of thousands of dollars in something that is really just a bunch  of guys with some ideas. But when you look at it from the rich people's point of view, the picture is more encouraging. Most rich  people are looking for good investments. If you really think you have a chance of succeeding, you're doing them a favor by letting them invest. Mixed with any annoyance they might feel about being  approached will be the thought: are these guys the next Google?
• Getting money from an actual VC firm is a bigger deal than getting money from angels. The amounts of money involved are larger, millions usually. So the deals take longer, dilute you more, and impose more onerous conditions.
• You may wonder how much to tell VCs. And you should, because some of them may one day be funding your competitors. I think the best plan is not to be overtly secretive, but not to tell them everything either. After all, as most VCs say, they're more interested in the people than the ideas. The main reason they want to talk about your idea is to judge you, not the idea. So as long as you seem like you know what you're doing, you can probably keep a few things back from them.
• More people are the right sort of person to start a startup than realize it.
• So who should start a startup? Someone who is a good hacker, between about 23 and 38, and who wants to solve the money problem in one shot instead of getting paid gradually over a conventional working life.
• What drives people to start startups is (or should be) looking at existing technology and thinking, don't  these guys realize they should be doing x, y, and z? And that's  also a sign that one is a good hacker.
• Do you actually want to start a startup? What it amounts to, economically, is compressing your working life into the smallest possible space. Instead of working at an ordinary rate for 40 years, you work like hell for  four. And maybe end up with nothing-- though in that case it probably won't take four years.
• If you want to do it, do it. Starting a startup is not the great mystery it seems from outside. It's not something you have to know about "business" to do. Build something users love, and spend less than you make. How hard is that?

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• Venture funding works like gears. A typical startup goes through several rounds of funding, and at each round you want to take just enough money to reach the speed where you can shift into the next gear.
• Competitors punch you in the jaw, but investors have you by the balls.
• The SEC defines an "accredited investor" as someone with over a million dollars in liquid assets or an income of over $200,000 a year. The regulatory burden is much lower if a company's shareholders are all accredited investors.
• To be a startup, a company has to be a product business, not a service business. By which I mean not that it has to make something physical, but that it has to have one thing it sells to many people, rather than doing custom work for individual clients. Custom work doesn't scale. To be a startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at individual weddings and bar mitzvahs.
• In a startup, as in grad school, a lot of what ends up driving you are the expectations of your family and friends. Once you start a startup and tell everyone that's what you're doing, you're now on a path labelled "get rich or bust." You now have to get rich, or you've failed.

  • Get Rich or Die Trying!
• Fear of failure is an extraordinarily powerful force. Usually it prevents people from starting things, but once you publish some definite ambition, it switches directions and starts working in your favor.
• The contacts and advice can be more important than the money. When del.icio.us took money from investors, they took money from, among others, Tim O'Reilly. The amount he put in was small compared to the VCs who led the round, but Tim is a smart and influential guy and it's good to have him on your side.
• One of the dangers of taking investment from individual angels, rather than through an angel group or investment firm, is that they have less reputation to protect. A big-name VC firm will not screw you too outrageously, because other founders would avoid them if word got out.

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