My series of notes on Y Combinator’s Startup Library:
In a sense there’s just one mistake that kills startups: not making something users want. So really this is a list of 18 things that cause startups not to make something users want.
1. Single Founder
What’s wrong with having one founder? To start with, it’s a vote of no confidence. It probably means the founder couldn’t talk any of his friends into starting the company with him. That’s pretty alarming, because his friends are the ones who know him best.
But even if the founder’s friends were all wrong and the company is a good bet, he’s still at a disadvantage. Starting a startup is too hard for one person. Even if you could do all the work yourself, you need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong.
“I can’t let my friends down.” This is one of the most powerful forces in human nature, and it’s missing when there’s just one founder.
2. Bad Location
The reason startups prosper in [good locations] is probably the same as it is for any industry: that’s where the experts are. Standards are higher; people are more sympathetic to what you’re doing; the kind of people you want to hire want to live there; supporting industries are there; the people you run into in chance meetings are in the same business.
3. Marginal Niche
Most of the groups that apply to Y Combinator suffer from a common problem: choosing a small, obscure niche in the hope of avoiding competition.
Choosing a marginal project is the startup equivalent of my eight year old strategy for dealing with fly balls. If you make anything good, you’re going to have competitors, so you may as well face that. You can only avoid competition by avoiding good ideas.
I think this shrinking from big problems is mostly unconscious. It’s not that people think of grand ideas but decide to pursue smaller ones because they seem safer. Your unconscious won’t even let you think of grand ideas. So the solution may be to think about ideas without involving yourself. What would be a great idea for someone else to do as a startup?
4. Derivative Idea
If you look at the origins of successful startups, few were started in imitation of some other startup. Where did they get their ideas? Usually from some specific unsolved problem the founders identified.
It seems like the best problems to solve are ones that affect you personally.
Instead of starting from companies and working back to the problems they solved, look for problems and imagine the company that might solve them. What do people complain about? What do you wish there was?
In some fields the way to succeed is to have a vision of what you want to achieve, and to hold true no matter what setbacks you encounter. Starting startups is not one of them. Startups are more like science, where you need to follow the trail wherever it leads.
So don’t get too attached to your original plan, because it’s probably wrong. Most successful startups end up doing something different than they originally intended — often so different that it doesn’t even seem like the same company. You have to be prepared to see the better idea when it arrives. And the hardest part of that is often discarding your old idea.
But openness to new ideas has to be tuned just right. Switching to a new idea every week will be equally fatal. Is there some kind of external test you can use? One is to ask whether the ideas represent some kind of progression. If in each new idea you’re able to re-use most of what you built for the previous ones, then you’re probably in a process that converges. Whereas if you keep restarting from scratch, that’s a bad sign.
Fortunately there’s someone you an ask for advice: your users. If you’re thinking about turning in some new direction and your users seem excited about it, it’s probably a good bet.
6. Hiring Bad Programmers
When I think about what killed most of the startups in the e-commerce business back in the 90s, it was bad programmers. A lot of those companies were started by business guys who thought the way startups worked was that you had some clever idea and then hired programmers to implement it. That’s actually much harder than it sounds — almost impossibly hard in fact — because business guys can’t tell which are the good programmers. They don’t even get a shot at the best ones, because no one really good wants a job implementing the vision of a business guy.
7. Choosing the Wrong Platform
Platform is a vague word. It could mean an operating system, or a programming language, or a “framework” built on top of a programming language. It implies something that both supports and limits, like the foundation of a house.
How do you pick the right platforms? The usual way is to hire good programmers and let them choose. But there is a trick you could use if you’re not a programmer: visit a top computer science department and see what they use in research projects.
8. Slowness in Launching
Companies of all sizes have a hard time getting software done. It’s intrinsic to the medium; software is always 85% done. It takes an effort of will to push through this and get something released to users.
One reason to launch quickly is that it forces you to actually finish some quantum of work.
The other reason you need to launch is that it’s only by bouncing your idea off users that you fully understand it.
Several distinct problems problems manifest themselves as delays in launching: working too slowly; not truly understanding the problem; fear of having to deal with users; fear of being judged; working on too many different things; excessive perfectionism. Fortunately you can combat all of them by the simpel expedient of forcing yourself to launch something fairly quickly.
9. Launching Too Early
The danger here is that you ruin your reputation. You launch something, the early adopters try it out, and if it’s no good they may never come back.
So what’s the minimum you need to launch? We suggest startups think about what they plan to do, identify a core that’s both (a) useful on its own and (b) something that can be incrementally expanded into the whole project, and then get that done as soon as possible.
This is the same approach I use for writing software. Think about the overall goal, then start by writing the smallest subset of it that does anything useful. If it’s a subset, you’ll have to write it anyway, so in the worst case you won’t be wasting your time. But more likely you’ll find that implementing a working subset is both good for morale and helps you see more clearly what the rest should do.
10. Having No Specific User in Mind
You can’t build things users like without understanding them. Perhaps there’s a rule here: you create wealth in proportion to how well you understand the problem you’re solving, and the problems you understand best are your own.
If you’re trying to solve problems ou don’t understand, you’re hosed.
When designing for other people you have to be empirical. You can no longer guess what will work; you have to find users and measure their responses.
11. Raising Too Little Money
Startup funding is measured in time. Every startup that isn’t profitable (meaning nearly all of them, initially) has a certain amount of time left before the money runs out and they have to stop. This is sometimes referred to as runway, as in “How much runway do you have left?” It’s a good metaphor because it reminds you that when the money runs out you’re going to be airborne or dead.
12. Spending Too Much
It’s hard to distinguish spending too much from raising too little.
The classic way to burn through cash is by hiring a lot of people. We have three general suggestions about hiring: (a) don’t do it if you can avoid it, (b) pay people with equity rather than salary, no just to save money, but because you want the kind of people who are committed enough to prefer that, and (c) only hire people who are either going to write code or go out and get users, because those are the only things you need at first.
13. Raising Too Much Money
The problem is not so much the money itself as what comes with it. As one VC who spoke at Y Combinator said, “Once you take several million dollars of my money, the clock is ticking.”
Perhaps more dangerously, once you take a lot of money it gets harder to change direction.
Another drawback of large investments is the time they take. The time required to raise money grows with the amounts.
14. Poor Investor Management
Pissing off investors by ignoring them is probably less dangerous than caving in to them.
A lot of our energy got drained away in disputes with investors instead of going into the product.
15. Sacrificing Users to (Supposed) Profit
When I said at the beginning that if you make something users want, you’ll be fine, you may have noticed I didn’t mention anything about having the right business model.
The reason we tell founders not to worry about the business model initially is that making something people want is so much harder.
And the core problem in a startup is how to create wealth (= how much people want something * the number who want it), not how to convert that wealth into money.
16. Not Wanting to Get Your Hands Dirty
No one trusts an idea till you embody it in a product and use that to grow a user base. Then they’ll pay big time.
If you’re going to attract users, you’ll probably have to get up from your computer and go find some. It’s unpleasant work, but if you can make yourself do it you have a much greater chance of succeeding.
If you want to start a startup, you have to face the fact that you can’t just hack. At least one hacker will have to spend some of the time doing business stuff.
17. Fights Between Founders
Most of the disputes I’ve seen between founders could have been avoided if they’d been more careful about who they started a company with.
The people are the most important ingredient in a startup, so don’t compromise there.
18. A Half-Hearted Effort
The most common type is not the one that makes spectacular mistakes, but the one that doesn’t do much of anything — the one we never even hear about, because it was some project a couple guys started while working on their day jobs, but which never got anywhere and was gradually abandoned.
Statistically, if you want to avoid failure, it would seem like the most important thing is to quit your day job.
Most startups fail because they don’t make something people want, and the reason most don’t is that they don’t try hard enough. In other words, starting a startup is just like everything else. The biggest mistake you can make is not to try hard enough. To the extent there’s a secret to success, it’s not to be in denial about that.