Paul Graham Explains How to Start a Startup

woginuk writes "Paul Graham has posted a new essay on his website on how to start a startup. According to him '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. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.' How difficult can that be? So go start them startups."

Comments

Man last time I read something this positive

[Fox_1]

was back during the bubble, I worked for a start-up. Note the past tense.

and on the subject of NOTEs take a look at number 2 from his list of notes at the bottom of the article (I included only the first 2)

Notes

[1] Google's revenues are about two billion a year, but half comes from ads on other sites.

[2] One advantage startups have over established companies is that there are no discrimination laws about starting businesses. For example, I would be reluctant to start a startup with a woman who had small children, or was likely to have them soon. But you're not allowed to ask prospective employees if they plan to have kids soon. Believe it or not, under current US law, you're not even allowed to discriminate on the basis of intelligence. Whereas when you're starting a company, you can discriminate on any basis you want about who you start it with.

Re:Make sure you live frugally!

[BWJones]

I should also have mentioned. There is a wonderful documentary called Startup.com that documents a small companies beginnings from obtaining VC funding to their rise and ultimate fall. It was an amazing example of a not atypical experience where a company was organized and obtained VC funding based solely upon an idea. They had no infrastructure, no network, no customers, no product. Yet they were able to secure a significant amount of VC funding. It's an absolute hoot to watch.

Hmm...

[Misch]

Except thanks to the new bankruptcy reform bill passed yesterday, it's raising the opportunity costs on small business owners.

Often, even with a decent business plan, banks will require people to take out personal loans to get a small business started. With yesterdays new bill that benefits banks and credit card companies, people will have fewer opportunities to get out from the debt they created while trying to get a business off the ground.

With less of an incentive to create new opportunities, I feel that this will hurt the ability of America to be a leader in "innovation".

Re:I'd rather hear the same

[JohnGrahamCumming]

Allen Morgan, a VC with the firm Mayfield, has a blog, where he's been dispensing wisdom on how to get funded. Read it here: http://allensblog.typepad.com/

John.

Re:I'd rather hear the same

[same_old_story]

well, that depends.

if your goal is to become a multi billion dollar business person. ok, point taken.

if all you want is a few millions to live your life as you please, then one 50 million sell is more than enough.

by his essays, I dont think his target audience is the former, actually more like the later.

cheers

People are the hardest part

[lux55]

In my experience, people prove to be the most critical and the most difficult part of the equation. Most people are not startup employee material. Most people, especially these days, want little responsibility, no risk, and high pay. My dad calls the high pay part an "entitlement attitude", but I couldn't tell you where the phrase originated. The risk part is understandable. The lower responsibility however, is better achieved in the same way as the low risk, by becoming another minute piece in a large enough institution that the bureaucracy adds a layer of padding between yourself and the exit ways.

I definitely think it keeps things much simpler for a startup to be owned by a single person, it also creates a significant hurdle to people being dedicated to your cause. There's little for them to gain, much to risk, and the pay won't be great until you're cashflow positive somewhere down the road.

The other problematic aspect of finding the right people is that most people lack the required drive for excellence. They want crude effectiveness, and nothing more. In a smaller company, you need more perfectionists, because there is no bureaucratic padding between your work and the customer, which means that things have to be done right the first time. From my experience, excellence is getting harder and harder to find, and I believe our societal and educational structures are the cause of this condition. But that's waxing philosophical, so I'll refrain, in this post at least. ;)

US LAW

[DarkSarin]

In footnote #2 he states that it is currently illegal to discriminate based on intelligence in the US.

This is not exactly correct. It is illegal to discriminate on a number of things, but intelligence is not one of them--provided that hiring based on intelligence is related to the job and you can prove it. The other stipulation is that it cannot serve as a proxy for discriminating against a protected class. This is where many companies get into trouble.

Can you use intelligence as a hiring tool? Certainly, but be careful! Don't be stupid, hire an expert (I'll take the job), and make sure that you aren't accidentally discriminating against a protected group (gender, race, ethnicity, religion, etc), and you'll be fine.

All that said, overall, I think he's fairly close to the mark with his ideas. Essentially, people matter, money matters, and hard work matters. Like one person told me--kiss your family/SO goodbye and tell them you love them. Three to four years later, you can breathe again, and they'll get to know you again.

There are other ways, but it takes a LOT of work.