Ideas for Startups

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

October 2005

*(This essay is derived from a talk at the 2005
Startup School.)*

How do you get good ideas for
startups? That's probably the number
one question people ask me.

I'd like to reply with another question: why do people think it's
hard to come up with ideas for startups?

That might seem a stupid thing to ask. Why do they think
it's hard? If people can't do it, then it is hard, at least
for them. Right?

Well, maybe not. What people usually say is not that they can't
think of ideas, but that they don't have any. That's not quite the
same thing. It could be the reason they don't have any is that
they haven't tried to generate them.

I think this is often the case. I think people believe that coming
up with ideas for startups is very hard-- that it must be
very hard-- and so they don't try do to it. They assume ideas are
like miracles: they either pop into your head or they don't.

I also have a theory about why people think this. They overvalue
ideas. They think creating a startup is just a matter of implementing
some fabulous initial idea. And since a successful startup is worth
millions of dollars, a good idea is therefore a million dollar idea.

If coming up with an idea for a startup equals coming up with a
million dollar idea, then of course it's going to seem hard. Too
hard to bother trying. Our instincts tell us something so valuable
would not be just lying around for anyone to discover.

Actually, startup ideas are not million dollar ideas, and here's
an experiment you can try to prove it: just try to sell one. Nothing
evolves faster than markets. The fact that there's no market for
startup ideas suggests there's no demand. Which means, in the
narrow sense of the word, that startup ideas are worthless.

Questions

The fact is, most startups end up nothing like the initial idea.
It would be closer to the truth to say the main value of your initial
idea is that, in the process of discovering it's broken, you'll
come up with your real idea.

The initial idea is just a starting point-- not a blueprint, but a
question. It might help if they were expressed that way. Instead
of saying that your idea is to make a collaborative, web-based
spreadsheet, say: could one make a collaborative, web-based
spreadsheet? A few grammatical tweaks, and a woefully incomplete
idea becomes a promising question to explore.

There's a real difference, because an assertion provokes objections
in a way a question doesn't. If you say: I'm going to build a
web-based spreadsheet, then critics-- the most dangerous of which
are in your own head-- will immediately reply that you'd be competing
with Microsoft, that you couldn't give people the kind of UI they
expect, that users wouldn't want to have their data on your servers,
and so on.

A question doesn't seem so challenging. It becomes: let's try
making a web-based spreadsheet and see how far we get. And everyone
knows that if you tried this you'd be able to make something
useful. Maybe what you'd end up with wouldn't even be a spreadsheet.
Maybe it would be some kind of new spreadsheet-like collaboration
tool that doesn't even have a name yet. You wouldn't have thought
of something like that except by implementing your way toward it.

Treating a startup idea as a question changes what you're looking
for. If an idea is a blueprint, it has to be right. But if it's
a question, it can be wrong, so long as it's wrong in a way that
leads to more ideas.

One valuable way for an idea to be wrong is to be only a partial
solution. When someone's working on a problem that seems too
big, I always ask: is there some way to bite off some subset of the
problem, then gradually expand from there? That will generally
work unless you get trapped on a local maximum, like 1980s-style
AI, or C.

Upwind

So far, we've reduced the problem from thinking of a million dollar
idea to thinking of a mistaken question. That doesn't seem so hard,
does it?

To generate such questions you need two things: to be familiar with
promising new technologies, and to have the right kind of friends.
New technologies are the ingredients startup ideas are made of, and
conversations with friends are the kitchen they're cooked in.

Universities have both, and that's why so many startups grow out
of them. They're filled with new technologies, because they're
trying to produce research, and only things that are new count as
research. And they're full of exactly the right kind of people to
have ideas with: the other students, who will be not only smart but
elastic-minded to a fault.

The opposite extreme would be a well-paying but boring job at a big
company. Big companies are biased against new technologies, and
the people you'd meet there would be wrong too.

In an essay I wrote for high school students,
I said a good rule of thumb was to stay upwind-- to
work on things that maximize your future options. The principle
applies for adults too, though perhaps it has to be modified to:
stay upwind for as long as you can, then cash in the potential
energy you've accumulated when you need to pay for kids.

I don't think people consciously realize this, but one reason
downwind jobs like churning out Java for a bank pay so well is
precisely that they are downwind. The market price for that kind
of work is higher because it gives you fewer options for the future.
A job that lets you work on exciting new stuff will tend to pay
less, because part of the compensation is in the form of the new
skills you'll learn.

Grad school is the other end of the spectrum from a coding job at
a big company: the pay's low but you spend most of your time working
on new stuff. And of course, it's called "school," which makes
that clear to everyone, though in fact all jobs are some percentage
school.

The right environment for having startup ideas need not be a
university per se. It just has to be a situation with a large
percentage of school.

It's obvious why you want exposure to new technology, but why do
you need other people? Can't you just think of new ideas yourself?
The empirical answer is: no. Even Einstein needed people to bounce
ideas off. Ideas get developed in the process of explaining them
to the right kind of person. You need that resistance, just
as a carver needs the resistance of the wood.

This is one reason Y Combinator has a rule against investing in
startups with only one founder. Practically every successful company
has at least two. And because startup founders work under great
pressure, it's critical they be friends.

I didn't realize it till I was writing this, but that may help
explain why there are so few female startup founders. I read on
the Internet (so it must be true) that only 1.7% of VC-backed
startups are founded by women. The percentage of female hackers
is small, but not that small. So why the discrepancy?

When you realize that successful startups tend to have multiple
founders who were already friends, a
possible explanation emerges. People's best friends are likely to
be of the same sex, and if one group is a minority in some population,
pairs of them will be a minority squared.
[1]

Doodling

What these groups of co-founders do together is more complicated
than just sitting down and trying to think of ideas. I suspect the
most productive setup is a kind of together-alone-together sandwich.
Together you talk about some hard problem, probably getting nowhere.
Then, the next morning, one of you has an idea in the shower about
how to solve it. He runs eagerly to to tell the others, and together
they work out the kinks.

What happens in that shower? It seems to me that ideas just pop
into my head. But can we say more than that?

[...]

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