Key Lessons from Paul Graham’s Legendary Essay, ‘How to Start a Startup’: Part 1-of-3

 

In 2005, legendary VC Paul Graham wrote what has become required reading for anyone looking to start a startup: an article entitled, ‘How to Start a Startup’. Today, Ignitia begins a 3-part series reviewing the key points from this legendary essay.

 Startups: Hard, but Doable

Right at the outset of the article, Mr. Graham states, ‘You need three things to create a successful startup: to start with good people, to make something customers actually want, and to spend as little money as possible.’ According to Mr. Graham, a startup that does all three of these things will have the best chance to succeed. This idea, according to Mr. Graham, should make anyone setting out to start a startup very excited because all three are very doable. Hard… but doable. In fact, Mr. Graham states if there is one message he wants to convey to anyone looking to build a successful startup it is this: It’s hard. But doable.

The Idea

According to Mr. Graham the first thing you’ll need is the idea. According to Mr. Graham it doesn’t need to be a brilliant idea to start a startup. All you need to offer is a better product or service than what people are currently using. To find ideas like this, Mr. Graham suggests we, ‘Look at something people are trying to do, and figure out how to do it in a way that doesn’t suck.’ According to Mr. Graham, even a brilliant idea is not really worth all that much in the grand scheme of starting a company. The reason for this according to Mr. Graham is that so often in startups success requires a pivoting. While Mr. Graham states great ideas are certainly great to have, he also emphasized they should be viewed as merely the starting point. What really matters according to Mr. Graham are the teams and people who execute these ideas, a theme he tackles in his next chapter.

The Employees

“Good people can fix bad ideas, but good ideas can’t save bad people.” – Paul Graham

Mr. Graham begins this chapter by describing what he means by ‘good people’. According to Mr. Graham, when he was looking to hire for his own startup he wanted people who could be described as being an ‘animal’. For Mr. Graham, this meant the super tenacious, never-let-up, hyper-aggressive attitude of someone who would not be satisfied with anything less than their very best. According to Mr. Graham, this is a quality necessary to succeed in a startup. For his own company Mr. Graham then applied three additional tests when hiring his new employees: ‘Was the person genuinely smart? If so, could they actually get things done? And finally, since a few good hackers have unbearable personalities, could we stand to have them around?’ According to Mr. Graham, these tests were unique to his company, but served well to determine the type of person they wanted to bring on board. According to Mr. Graham, the most likely hire you will make early on are of friends and personal contacts. And it’s a good thing, too. According to Mr. Graham, being friends with a person for only a few days will tell you much more about them than any job interview ever will. Mr. Graham suggests the ideal environment may be to work on project you want to with people you like.

The Founders

When it comes to founders, Mr. Graham recommends having at least two – but, no more than four. According to Mr. Graham, at least two are required because everyone needs to share the load of a startup with someone. However, with more than four founders, disagreements are bound to arise and decisions will be difficult to make. Ideally, according to Mr. Graham, one of the founders should be an expert in the field, but this is not necessarily a requirement. As far as whether one of the founders should be a ‘business person’, according to Mr. Graham this too may not be necessary. According to Mr. Graham, business is no great mystery. ‘You just try to get people to pay you for stuff.’ And it’s that simple. Mr. Graham’s philosophy is that anyone can learn to do business. To back this claim up, he states that at the time of his writing only 5 of the Forbes top 50 CEO’s held an MBA. More likely, according to Mr. Graham, they were people with technical backgrounds, like Steve Jobs and Bill Gates. The one reason to include businesspeople however, is because at least one founder should be focused on what customers actually want. According to Mr. Graham, if you can’t understand users you should, ‘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.’

In the second installment of this series, we will start-off with Mr. Graham’s explanation of how to know what customers want, and how to keep them happy.

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