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My series of notes on Y Combinator’s Startup Library:

Original: http://paulgraham.com/start.html

My notes

Takeaway: Build something users love and spend less than you make. How hard is that?

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.

If there is one message I’d like to get across about startups, that’s it. There is no magically difficult step that requires brilliance to solve.

The Idea

In particular, you don’t need a brilliant idea to start a startup around. The way a startup makes money is to offer people better technology than they have now. But what people have now is often so bad that it doesn’t take brilliance to do better.

I can think of several heuristics for generating ideas for startups, but most reduce to this: look at something people are trying to do, and figure out how to do it in a way that doesn’t suck.

[The initial idea’s] value is mainly as starting points: as questions for the people who had them to continue thinking about. What matters is not ideas, but the people who have them. Good people can fix bad ideas, but good ideas can’t save bad people.

People

What do I mean by good people? One of the best tricks I learned during our startup was a rule for deciding who to hire. Could you describe the person as an animal?

If you think about people you know, you’ll find the animal test is easy to apply. Call the person’s image to mind and imagine the sentence “so-and-so is an animal.” If you laugh, they’re not.

What you should do in college is work on your own projects. The project may even grow into a startup. Don’t force things; just work on stuff you like with people you like.

What I discovered was that business was no great mystery. You just try to get people to pay you for stuff.

The rulers of the technology business tend to come from technology, not business.

There is one reason you might want to include business people in a startup, though: because you have to have at least one person willing and able to focus on what customers want.

If you can’t understand users, however, you should either 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.

What Customers Want

In nearly every failed startup, the real problem was that customers didn’t want the product. Can you think of one that had a massively popular product and still failed?

The only way to make something customers want is to get a prototype in front of them and refine it based on their reactions.

[Rapid prototyping] is certainly the right way to write software for a startup. In a startup, your initial plans are almost certain to be wrong in some way, and your first priority should be to figure out where. The only way to do that is to try implementing them.

It’s worth trying very, very hard to make technology easy to use.

How do you figure out what customers want? Watch them.

If you’re developing technology for money, you’re probably not going to be developing it for people like you. Indeed, you can use this as a way to generate ideas for startups: what do people who are not like you want from technology?

In technology, the low end always eats the high end. It’s easier to make an inexpensive product more powerful than to make a powerful product cheaper. So the products that start as cheap, simple options tend to gradually grow more powerful till, like water rising in a room, they squash the “high-end” products against the ceiling.

Raising Money

It turns out that no one comes and arrests you if you don’t do everything you’re supposed to when starting a company.

Before you consummate a startup, ask everyone about their previous IP history.

Valuation wasn’t just the value of the code we’d written so far. It was also the value of our ideas, which turned out to be right, and of all the future work we’d do, which turned out to be a lot.

Not Spending It

That’s the key to success as a startup. There is nothing more important than understanding your business.

Google understands a few other things most Web companies still don’t. The most important is that you should put users before advertisers, even though the advertisers are paying and users aren’t. One of my favorite bumper stickers reads, “if the people lead, the leaders will follow.” Paraphrased for the Web, this becomes “get all the users, and the advertisers will follow.” More generally, design your product to please users first, and then think about how to make money from it. If you don’t put users first, you leave a gap for competitors who do.

For most startups the model should be grad student, not law firm.

The key to productivity is for people to come back to work after dinner.

Should You?

I spent a year working for a software company to pay off my college loans. It was the worst year of my adult life, but I learned, without realizing it at the time, a lot of valuable lessons about the software business. In this case they were mostly negative lessons: don’t have a lot of meetings; don’t have chunks of code that multiple people own; don’t have a sales guy running the company; don’t make a high-end product; don’t let your code get too big; don’t leave finding bugs to QA people; don’t go too long between releases; don’t isolate developers from users; don’t move from Cambridge to Route 128; and so on.

So if you’re thinking, I don’t care what he says, I’m going to start a company now, you may be the sort of person who could get away with it.

If you want to do it, do it. Starting a startup is not the great mystery it seems from outside. It’s not something you have to know about “business” to do. Build something users love, and spend less than you make. How hard is that?