Do Things that Don't Scale

[Do Things that Don't Scale]

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| Want to start a startup? Get funded by
Y Combinator. |

July 2013

One of the most common types of advice we give at Y Combinator is
to do things that don't scale. A lot of would-be founders believe
that startups either take off or don't. You build something, make
it available, and if you've made a better mousetrap, people beat a
path to your door as promised. Or they don't, in which case the
market must not exist.
[1]

Actually startups take off because the founders make them take off.
There may be a handful that just grew by themselves, but usually
it takes some sort of push to get them going. A good metaphor would
be the cranks that car engines had before they got electric starters.
Once the engine was going, it would keep going, but there was a
separate and laborious process to get it going.

Recruit

The most common unscalable thing founders have to do at the start
is to recruit users manually. Nearly all startups have to. You
can't wait for users to come to you. You have to go out and get
them.

Stripe is one of the most successful startups we've funded, and the
problem they solved was an urgent one. If anyone could have sat
back and waited for users, it was Stripe. But in fact they're
famous within YC for aggressive early user acquisition.

Startups building things for other startups have a big pool of
potential users in the other companies we've funded, and none took
better advantage of it than Stripe. At YC we use the term "Collison
installation" for the technique they invented. More diffident
founders ask "Will you try our beta?" and if the answer is yes,
they say "Great, we'll send you a link." But the Collison brothers
weren't going to wait. When anyone agreed to try Stripe they'd say
"Right then, give me your laptop" and set them up on the spot.

There are two reasons founders resist going out and recruiting users
individually. One is a combination of shyness and laziness. They'd
rather sit at home writing code than go out and talk to a bunch of
strangers and probably be rejected by most of them. But for a
startup to succeed, at least one founder (usually the CEO) will
have to spend a lot of time on sales and marketing.
[2]

The other reason founders ignore this path is that the absolute
numbers seem so small at first. This can't be how the big, famous
startups got started, they think. The mistake they make is to
underestimate the power of compound growth. We encourage every
startup to measure their progress by weekly growth
rate. If you have 100 users, you need to get 10 more next week
to grow 10% a week. And while 110 may not seem much better than
100, if you keep growing at 10% a week you'll be surprised how big
the numbers get. After a year you'll have 14,000 users, and after
2 years you'll have 2 million.

You'll be doing different things when you're acquiring users a
thousand at a time, and growth has to slow down eventually. But
if the market exists you can usually start by recruiting users
manually and then gradually switch to less manual methods.
[3]

Airbnb is a classic example of this technique. Marketplaces are
so hard to get rolling that you should expect to take heroic measures
at first. In Airbnb's case, these consisted of going door to door
in New York, recruiting new users and helping existing ones improve
their listings. When I remember the Airbnbs during YC, I picture
them with rolly bags, because when they showed up for tuesday dinners
they'd always just flown back from somewhere.

Fragile

Airbnb now seems like an unstoppable juggernaut, but early on it
was so fragile that about 30 days of going out and engaging in
person with users made the difference between success and failure.

That initial fragility was not a unique feature of Airbnb. Almost
all startups are fragile initially. And that's one of the biggest
things inexperienced founders and investors (and reporters and
know-it-alls on forums) get wrong about them. They unconsciously
judge larval startups by the standards of established ones. They're
like someone looking at a newborn baby and concluding "there's no
way this tiny creature could ever accomplish anything."

It's harmless if reporters and know-it-alls dismiss your startup.
They always get things wrong. It's even ok if investors dismiss
your startup; they'll change their minds when they see growth. The
big danger is that you'll dismiss your startup yourself. I've seen
it happen. I often have to encourage founders who don't see the
full potential of what they're building. Even Bill Gates made that
mistake. He returned to Harvard for the fall semester after starting
Microsoft. He didn't stay long, but he wouldn't have returned at
all if he'd realized Microsoft was going to be even a fraction of
the size it turned out to be.
[4]

The question to ask about an early stage startup is not "is this
company taking over the world?" but "how big could this company
get if the founders did the right things?" And the right things
often seem both laborious and inconsequential at the time. Microsoft
can't have seemed very impressive when it was just a couple guys
in Albuquerque writing Basic interpreters for a market of a few
thousand hobbyists (as they were then called), but in retrospect
that was the optimal path to dominating microcomputer software.
And I know Brian Chesky and Joe Gebbia didn't feel like they were
en route to the big time as they were taking "professional" photos
of their first hosts' apartments. They were just trying to survive.
But in retrospect that too was the optimal path to dominating a big
market.

How do you find users to recruit manually? If you build something
to solve your own problems, then
you only have to find your peers, which is usually straightforward.
Otherwise you'll have to make a more deliberate effort to locate
the most promising vein of users. The usual way to do that is to
get some initial set of users by doing a comparatively untargeted
launch, and then to observe which kind seem most enthusiastic, and
seek out more like them. For example, Ben Silbermann noticed that
a lot of the earliest Pinterest users were interested in design,
so he went to a conference of design bloggers to recruit users, and
that worked well.
[5]

Delight

You should take extraordinary measures not just to acquire users,
but also to make them happy. For as long as they could (which
turned out to be surprisingly long), Wufoo sent each new user a
hand-written thank you note. Your first users should feel that
signing up with you was one of the best choices they ever made.
And you in turn should be racking your brains to think of new ways
to delight them.

Why do we have to teach startups this? Why is it counterintuitive
for founders? Three reasons, I think.

One is that a lot of startup founders are trained as engineers,
and customer service is not part of the training of engineers.
You're supposed to build things that are robust and elegant, not
be slavishly attentive to individual users like some kind of
salesperson. Ironically, part of the reason engineering is
traditionally averse to handholding is that its traditions date
from a time when engineers were less powerful — when they were
only in charge of their narrow domain of building things, rather
than running the whole show. You can be ornery when you're Scotty,
but not when you're Kirk.

[...]

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