Before the Startup

****

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

October 2014

*(This essay is derived from a guest lecture in Sam Altman's startup class at
Stanford. It's intended for college students, but much of it is
applicable to potential founders at other ages.)*

One of the advantages of having kids is that when you have to give
advice, you can ask yourself "what would I tell my own kids?" My
kids are little, but I can imagine what I'd tell them about startups
if they were in college, and that's what I'm going to tell you.

Startups are very counterintuitive. I'm not sure why. Maybe it's
just because knowledge about them hasn't permeated our culture yet.
But whatever the reason, starting a startup is a task where you
can't always trust your instincts.

It's like skiing in that way. When you first try skiing and you
want to slow down, your instinct is to lean back. But if you lean
back on skis you fly down the hill out of control. So part of
learning to ski is learning to suppress that impulse. Eventually
you get new habits, but at first it takes a conscious effort. At
first there's a list of things you're trying to remember as you
start down the hill.

Startups are as unnatural as skiing, so there's a similar list for
startups. Here I'm going to give you the first part of it — the things
to remember if you want to prepare yourself to start a startup.

Counterintuitive

The first item on it is the fact I already mentioned: that startups
are so weird that if you trust your instincts, you'll make a lot
of mistakes. If you know nothing more than this, you may at least
pause before making them.

When I was running Y Combinator I used to joke that our function
was to tell founders things they would ignore. It's really true.
Batch after batch, the YC partners warn founders about mistakes
they're about to make, and the founders ignore them, and then come
back a year later and say "I wish we'd listened."

Why do the founders ignore the partners' advice? Well, that's the
thing about counterintuitive ideas: they contradict your intuitions.
They seem wrong. So of course your first impulse is to disregard
them. And in fact my joking description is not merely the curse
of Y Combinator but part of its raison d'etre. If founders' instincts
already gave them the right answers, they wouldn't need us. You
only need other people to give you advice that surprises you. That's
why there are a lot of ski instructors and not many running
instructors.
[1]

You can, however, trust your instincts about people. And in fact
one of the most common mistakes young founders make is not to
do that enough. They get involved with people who seem impressive,
but about whom they feel some misgivings personally. Later when
things blow up they say "I knew there was something off about him,
but I ignored it because he seemed so impressive."

If you're thinking about getting involved with someone — as a
cofounder, an employee, an investor, or an acquirer — and you
have misgivings about them, trust your gut. If someone seems
slippery, or bogus, or a jerk, don't ignore it.

This is one case where it pays to be self-indulgent. Work with
people you genuinely like, and you've known long enough to be sure.

Expertise

The second counterintuitive point is that it's not that important
to know a lot about startups. The way to succeed in a startup is
not to be an expert on startups, but to be an expert on your users
and the problem you're solving for them.
Mark Zuckerberg didn't succeed because he was an expert on startups.
He succeeded despite being a complete noob at startups, because he
understood his users really well.

If you don't know anything about, say, how to raise an angel round,
don't feel bad on that account. That sort of thing you can learn
when you need to, and forget after you've done it.

In fact, I worry it's not merely unnecessary to learn in great
detail about the mechanics of startups, but possibly somewhat
dangerous. If I met an undergrad who knew all about convertible
notes and employee agreements and (God forbid) class FF stock, I
wouldn't think "here is someone who is way ahead of their peers."
It would set off alarms. Because another of the characteristic
mistakes of young founders is to go through the motions of starting
a startup. They make up some plausible-sounding idea, raise money
at a good valuation, rent a cool office, hire a bunch of people.
From the outside that seems like what startups do. But the next
step after rent a cool office and hire a bunch of people is: gradually
realize how completely fucked they are, because while imitating all
the outward forms of a startup they have neglected the one thing
that's actually essential: making something people want.

Game

We saw this happen so often that we made up a name for it: playing
house. Eventually I realized why it was happening. The reason
young founders go through the motions of starting a startup is
because that's what they've been trained to do for their whole lives
up to that point. Think about what you have to do to get into
college, for example. Extracurricular activities, check. Even in
college classes most of the work is as artificial as running laps.

I'm not attacking the educational system for being this way. There
will always be a certain amount of fakeness in the work you do when
you're being taught something, and if you measure their performance
it's inevitable that people will exploit the difference to the point
where much of what you're measuring is artifacts of the fakeness.

I confess I did it myself in college. I found that in a lot of
classes there might only be 20 or 30 ideas that were the right shape
to make good exam questions. The way I studied for exams in these
classes was not (except incidentally) to master the material taught
in the class, but to make a list of potential exam questions and
work out the answers in advance. When I walked into the final, the
main thing I'd be feeling was curiosity about which of my questions
would turn up on the exam. It was like a game.

It's not surprising that after being trained for their whole lives
to play such games, young founders' first impulse on starting a
startup is to try to figure out the tricks for winning at this new
game. Since fundraising appears to be the measure of success for
startups (another classic noob mistake), they always want to know what the
tricks are for convincing investors. We tell them the best way to
convince investors is to make a startup
that's actually doing well, meaning growing fast, and then simply
tell investors so. Then they want to know what the tricks are for
growing fast. And we have to tell them the best way to do that is
simply to make something people want.

So many of the conversations YC partners have with young founders
begin with the founder asking "How do we..." and the partner replying
"Just..."

Why do the founders always make things so complicated? The reason,
I realized, is that they're looking for the trick.

So this is the third counterintuitive thing to remember about
startups: starting a startup is where gaming the system stops
working. Gaming the system may continue to work if you go to work
for a big company. Depending on how broken the company is, you can
succeed by sucking up to the right people, giving the impression
of productivity, and so on.
[2]
But that doesn't work with startups.
There is no boss to trick, only users, and all users care about is
whether your product does what they want. Startups are as impersonal
as physics. You have to make something people want, and you prosper
only to the extent you do.

[...]

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