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Before the Startup – Lecture Notes 3

This is a continuation of my notes covering Sam Altman’s startup class. You can also check out the intro notes (part 1 and part 2) and lecture 2 which is about building a great team.

Lecture 3 is given by Paul Graham, one of the most experienced voices in the startup world and an eloquent writer on the topic He’s also an entertaining speaker. I recommend listening to his actual video presentation.

The core of this lecture is about all of the stuff that comes before actually starting a startup. This encompasses things like how to get or recognize a great idea as well as a litany of generally useful but often counter-intuitive bits of knowledge about startups. In fact, the entire lecture is structured around understanding that startups are often very counter-intuitive.

One caveat to Paul’s lecture is in order. It often feels that one of his main goals is to issue a stark warning about the failure rates and opportunity costs of entering the startup world for the wrong reasons. As he says, “starting a startup is really hard.”

Paul wants us all to understand that startups are risky, that they have costs, and that if you’re an awestruck student buying into the entrepreneurial lifestyle because it seems sexy don’t do it. Caution is well warranted before venturing in this space.

The Main Idea

Startups are counter-intuitive. They often require suspending disbelief and pursuing actions that don’t make sense in other contexts. That’s why YC exists. That’s why good advisors can be useful.

Take for example two real world examples: skiing and running. Skiing is counter-intuitive to learn. You need to lean down the mountain to exercise control. Running, on the other hand, is far more intuitive. So there are a lot more ski instructors than running instructors. After all, “you don’t need people to give you advice that does not surprise you.”

Despite startups being counter-intuitive, there is one area where you can/must trust your instincts. That area is people. In fact:

“One of the big mistakes that founders make is to not trust their intuition about people enough. They meet someone, who seems impressive, but about whom they feel some misgivings and then later when things blow up, they say, “You know I knew there was something wrong about that guy, but I ignored it because he seemed so impressive.”

So pick people you would pick if you were picking friends. Be self-indulgent here. But make sure you’ve known the people on your team long enough to be sure about their quality. Note there are a lot of great articles about hiring and scaling a team.

Paul’s warning about only doing business with people who are basically decent seems specifically targeted towards his audience of young developers who may or may not have much context within the business world and therefore may have a belief that conducting business is (or should be) slightly distasteful.

Counter-intuitive Idea 1: You Don’t Need to be an Expert in Startups

Knowledge about startups isn’t what you need to succeed in founding one. You can learn what to do and get some understanding of common mistakes, but generally it’s all about your users and building something that solves a problem for them. For example, the way to succeed isn’t to know the mechanics of raising an angel round, it’s to have “expertise in your own users.”

In fact, having too much knowledge about “how startups work” could actually be counterproductive (see idea #2).

The only thing that matters is building something people want to use. Which means that this entire class about startups is limited in its usefulness! But if you still want to read on…

Counter-intuitive Idea 2: Going through the motions is dangerous

A lot of founders go through the motions of being a startup. Which means they pursue what they think they’re supposed to do. Things like hiring because you think you should, raising money, or renting an office all fall into this category.

But gaming the system doesn’t work here. If you don’t make something people want you will fail eventually. It’s not about tricks or appearances it’s about execution.

To Paul this entire process seems to tie back into the idea of building real value vs. learning to game the system by completing a series of actions (similar to how you might have gotten into college or how you can climb the corporate ladder). Much of the appeal of startups is that this is an arena where bullshit doesn’t work.

The illusion or appearance of success is doubly dangerous because while you may be able to fool investors for a time, you can’t fake your way to creating value for users. So ultimately, while it can feel good to come up with a plausible idea, raise money at a certain valuation, and hire your friends those outward motions can hide deep flaws. Because if you aren’t making something people want, you’re fucked. Period. And since half the point of playing the startup game is that you’re playing for equity, wasting your time is a huge opportunity cost.

Counter-intuitive Idea 3: Startups are all Consuming

Don’t start a startup too young. Startups are all consuming and the success of  a small sub-segment of them hides the true difficulty of being a founder. Plus, “If you start a startup, it will take over your life to a degree that you cannot imagine.”

Even “worse” if it succeeds it will take over your life for a long time; for several years, at the very least, maybe a decade, maybe the rest of your working life.” And it doesn’t get easier as the company scales, “the total volume of worry never decreases.”

Zuckerburg and Sergei started working on something in their very early 20s and have been running full sprint ever since. “Facebook is running [Zuckerberg] as much as he’s running Facebook.”

The idea that the real opportunity cost of a startup is hidden in success is profound.

Think about what a huge choice that is. This idea, this industry, this problem could dominate your entire working life and frame a huge part of what you contribute to the world. Now, it probably won’t do that—at least not forever—but it could. Are you willing to make that commitment?

It’s a question worth spending time pondering. What else could you or would you have done with your time? Could you have traveled the world unencumbered by obligation? Built something else? It’s analogous to having a child. Certain things become a lot harder afterwards.

Counter-intuitive Idea 4: You Have No Idea If you’re cut out for this

Starting a startup is very very hard. And its all consuming. So how do you know if you have what it takes to embark on the journey? You don’t. You don’t know if you’re right for starting a startup until you’ve done it. But doing it is a momentous undertaking. That’s quite a conundrum.

Part of the reason you don’t know if you’re cut out for the founder grind is that the experience is so different from anything else you’re used to. Again, there are no gimmicks and no tricks. That’s why when founders ask questions at YC they often get answers that start with “just do…[X]”. Again this is less a question of intelligence or talent and more a question of intangibles. Do you have the right stuff?

Predicting your startup performance becomes even more difficult in a startup that is working. The company inevitably will change a lot over the course of its life and thus force you to adapt as well. So”what you’re trying to estimate is not just what you are but what you could become” and it’s very difficult to predict “how tough and ambitious” you will become.

Preparing for the Startup

In lieu of being able to really prepare for being a founder what can you do? Paul suggests (at least as a student) focusing on the two things he thinks you must have before you start–an idea and cofounders. To get ideas learn about things that matter and work on interesting side projects. It’s somewhat up to you to triangulate on what is actually interesting versus merely entertaining but Paul’s advice to be ‘energetically interested’ sounds like good general life advice.

But the value of working on things that interest you is that these side projects often develop into the most promising startups. Why? Because the hidden ingredient for a startup is domain expertise.

As Paul puts it,

” Larry Page is Larry Page because he was an expert on search and the way he became an expert on search was because he was genuinely interested and not because of some ulterior motive. At its best starting a startup is merely a ulterior motive for curiosity and you’ll do it best if you introduce the ulterior motive at the end of the process. So here is ultimate advice for young would be startup founders reduced to two words: just learn.”

So stay curious.

Curiosity is (and this is just me chiming in) I think an often underrated quality in succeeding as a startup. Curiosity drives you to look at something in a new way to generate your idea in the first place. It’s what allows you to look at your business data and make inferences from it as you build. Agile and continual testing are amplified by a genuine curiosity to better understand your customers, to get closer to those you hire, and to constantly look to innovate on your organization, product, and market.

More than that, curiosity is what gives us a sense of playfulness. And playing is a powerful state from which to unlock creativity.

FYI: The lecture ends with some Q&A with Paul, which although entertaining, tends not to introduce many new ideas (or at least not ideas that are better digested within his essays)

I’ll end by highly recommending Paul Graham’s essays. Spending a couple days reading his writing will give you a priceless education on the philosophy of startups, common pitfalls, keys to succeed, helpful fundraising suggestions, and general nuggets of life wisdom sprinkled throughout.

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Last modified: January 31, 2015