Paul Graham Explains How to Start a Startup 423
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."
Man last time I read something this positive (Score:5, Interesting)
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.
Forgot number four, very important... (Score:1, Interesting)
File UCC papers on any order that you can't afford to lose over the civil matter of customer refusing to pay you. It only costs a few bucks and changes the rules so that you are still the owner of unpaid goods as opposed to the much less secure position of 'creditor'.
BTBF (been there been fucked)
Re:Make sure you live frugally! (Score:5, Interesting)
It's even easier than that (Score:3, Interesting)
A startup that always does that will probably succeed. How difficult can that be?
Hmm... (Score:5, Interesting)
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 (Score:5, Interesting)
John.
Re:I'd rather hear the same (Score:3, Interesting)
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
Re:I can't fail now (Score:3, Interesting)
Suggestions:
DO: by furniture at auction, pick up technology on sale, put down $.49/sf carpet, do you own work rather than hiring consultants, market by word of mouth or through your first clients.
DON'T: Buy solid mahogany desks, aeron chairs, and 30" HD montors, take out full page ads, or lease prime downtown office space in your first year.
Yes, I have a startup (of sorts). Yes, I made money in my second year. No, it wasn't a lot. Yes, I stared out with less than $10k in capital. No, I don't advertise (unless you count the yellow pages, where I buy an extra line with my web page address). Yes, I rent cheap, not-too-beautiful space four blocks from the "high rent" district - I pay 1/3 the SF rate.
I may not "live and breathe" my work - I have a family who gets as much of me as I can give - but I'm pretty good at what I do, I keep my customers happy, and I love what I do.
Oh, and I write off half my conputer toys as business expenses
RE persistence (Score:3, Interesting)
By this, I mean people who truly share your vision of growing the business.
I work for a guy who did an on-site PC service/support startup business. In fact, I was really only his 3rd. employee (after a part-time guy he hired for a while, and then let go of). I was very interested in this business, because it was similar to one a friend of mine started almost 10 years ago - but which unfortunately didn't make it. (I think it was an idea before its time back then... Not enough people relied on their home computers and were willing to pay someone to fix one for them on-site.) I always treat my job like I'm the business owner, and it apparently shows. (People call in all the time, confused, assuming it's my company - and wonder who my boss is!)
Sometimes I even stop and ask myself why I'm working so hard for relatively little when it's not even my own company, but then I remember that this is what I really wanted to do for a living. I spent years trying to find somebody actually doing it right. I don't have the money/resources to start something like this on my own, but I do have the know-how and experience to do the job well and please customers. So for me, it's worth doing my best to make sure this place sticks around!
Our problem now is, we've gotten to where there's too much work to do, and we need another full-time technician. But the people who keep applying for the job are too inexperienced, coming from other chain-store on-site places that do inferior work, or just the type of folks who only care about making a buck. (Sorry, but in this business - it just isn't smart to piss off a new customer because you nickel and dime them on every last minute you're out there. If they have an old PC that was barely worth paying your hourly fee to fix in the first place, you have to be a little flexible. Round down your time spent out there, etc. - so they'll be satisfied, and will call you again in the future.)
Nobody's gonna get rich doing this kind of work anyway. It's something you have to do because you really like driving around, seeing something a little different all the time - and get some satisfaction out of helping people out. I just don't know if we'll find other like-minded people to make this thing grow further, though.
Re:I'd rather hear the same (Score:1, Interesting)
My experiences are the opposite. We had an offer to be purchased for nearly $200 million; and the VCs turned it down either looking for a much bigger offer or an IPO.
VC's want home-runs - a few hundred million may satisfy the hackers in our company; but to the VCs any sale under a quarter billion was a rounding error not worth the time they put into it.
People are the hardest part (Score:5, Interesting)
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.
Re:Hmm... (Score:2, Interesting)
You buying stock is a sign of willingness to share the risks of the company.
You borrowing money is GIVING YOUR WORD that you will pay it back, plus interest. It doesn't matter if the bank knows that a percentage of people will default. Whether you should keep your word has nothing to do whether other customers keep theirs.
If you borrow money (whether from a bank, friend, or parent) then even bankruptcy shouldn't keep you from paying back all the money and interest that you promised to pay. If you don't pay what you promised to pay then you are a liar, no matter how legally protected you are.
I understand that life is not predictable. I understand that curcumstances beyond my control may force me into bankruptcy. If that happens than I am a liar until I find a way to keep my end of the agreement. I may have to live on ramen and rats while I pay back what I promised, but my primise matters to me.
Re:I'd rather hear the same (Score:2, Interesting)
To make some money off of it.
VC gives you money, you give him shares. The VC is bound to want his money back, with some interest on it (typically 40% p.a. and up).
The VC will want to sell his shares at one point.
Having an exit strategy laid down right from the beginning is, at least to me, a sign of honesty and transparency. At least on some level.
Required reading for Start-ups (Score:1, Interesting)
The Five Lessons [amazon.com]
The E-Myth [amazon.com]
How to Make Your Business Run Without You [amazon.com]
US LAW (Score:4, Interesting)
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.
Re:This is a load of crap. (Score:3, Interesting)