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

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

My notes

Takeaway: Wake up. Don’t sit here making up a priori theories about what users need. Go find some users and see what they need.

It is pretty well established now that grad students can start successful companies. And if grad students can do it, why not undergrads?

The main cost of starting a Web-based startup is food and rent. The most promising group to be liberated by the new, lower threshold are those who have everything investors want except experience.

Market Rate

The most productive young people will always be undervalued by large organizations, because the young have no performance to measure yet, and any error in guessing their ability will tend toward the mean.

What’s an especially productive 22 year old to do? One thing you can do is go over the heads of organizations, directly to the users. Any company that hires you is, economically, acting as a proxy for the customer. The rate at which they value you (though they may not consciously realize it) is an attempt to guess your value to the user. But there’s a way to appeal their judgement. If you want, you can opt to be valued directly by users, by starting your own company.

The market is a lot more discerning than any employer. All users care about is whether your site or software gives them what they want.

Product Development

Big companies are good at extracting the value from existing products, but bad at creating new ones.

The more general version of this problem is that there are too many new ideas for companies to explore them all.

And then of course, big companies are bad at product development because they’re bad at everything.

The Open Cage

With both employers and investors, the balance of power is slowly shifting towards the young. And yet they seem the last to realize it. Most just want to get a job.

Have you ever noticed that when animals are let out of cages, they don’t always realize at first that the door’s open? Often they have to be poked with a stick to get them out.

I think most undergrads don’t realize yet that the economic cage is open. The route to success is to build something valuable, and you don’t have to be working for an existing company to do that. Indeed, you can often do it better if you’re not.

Risk

Your early twenties are exactly the time to take insane career risks.**

If you start a startup, you’ll probably fail. Most startups fail. It’s the nature of the business. But it’s not necessarily a mistake to try something that has a 90% change of failing, if you can afford the risk. You’ll end up at 23 broke and a lot smarter. Which, if you think about it, is roughly what you hope to get from a graduate program.

Even if your startup does tank, you won’t harm your prospects with employers.

The Man is the Customer

Superficially, going to work for a company may feel like just the next in a series of institutions, but underneath, everything is different. The end of school is the fulcrum of your life, the point where you go from net consumer to net producer.

The other big change is that now, you’re steering. You can go anywhere you want. So it may be worth standing back and understanding what’s going on, instead of just doing the default thing.

All through college, and probably long before that, most undergrads have been thinking about what employers want. But what really matters is what customers want, because they’re the ones who give employers the money to pay you.

So instead of thinking about what employers want, you’re probably better off thinking directly about what users want.

Experience

I can tell you what tends to be missing when people lack experience. I’ve said that every startup needs three things: to start with good people, to make something users want, and not to spend too much money. It’s the middle one you get wrong when you’re inexperienced. There are plenty of undergrads with enough technical skill to write good software, and undergrads are not especially prone to waste money. If they get something wrong, it’s usually not realizing they have to make something people want.

My hypothesis is that all you have to do is smack hackers on the side of the head and tell them: Wake up. Don’t sit here making up a priori theories about what users need. Go find some users and see what they need.

Most successful startups not only do something very specific, but solve a problem people already know they have.

The big change that “experience” causes in your brain is learning that you need to solve people’s problems. Once you grasp that, you advance quickly to the next step, which is figuring out what those problems are. And that takes some effort, because the way software actually gets used, especially by the people who pay the most for it, is not at all what you might expect. For example, the stated purpose of Powerpoint is to present ideas. Its real role is to overcome people’s fear of public speaking. It allows you to give an impressive-looking talk about nothing, and it causes the audience to sit in a dark room looking at slides, instead of a bright one looking at you.

This kind of thing is out there for anyone to see. The key is to know to look for it — to realize that having an idea for a startup is not like having an idea for a class project. The goal in a startup is not to write a cool piece of software. It’s to make something people want. And to do that you have to look at users — forget about hacking, and just look at users. This can be quite a mental adjustment, because little if any of the software you write in school even has users.

A few steps before a Rubik’s Cube is solved, it still looks like a mess. I think there are a lot of undergrads whose brains are in a similar position: they’re only a few steps away from being able to start successful startups, if they wanted to, but they don’t realize it. They have more than enough technical skill. They just haven’t realized yet that the way to create wealth is to make what users want, and that employers are just proxies for users in which risk is pooled.

If you’re young and smart, you don’t need either of those. You don’t need someone else to tell you what users want, because you can figure it out yourself. And you don’t want to pool risk, because the younger you are, the more risk you should take.

A Public Service Message

So while I stand by our responsible advice to finish college and then go work for a while before starting a startup, I have to admit it’s one of those things the old tell the young, but don’t expect them to listen. We say this sort of thing mainly so we can claim we warned you. So don’t say I didn’t warn you.**
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