Excerpts from Paul Grahams’ October 2014 essay “Before the Startup” with commentary interspersed. This essay is in some ways less self-confident than many of his earlier ones. He seems to recognize more explicitly the limits of his ability to offer advice that entrepreneurs in the Y Combinator portfolio–or entrepreneurs applying to Y Combinator–will actually follow. The primary point he hammers home is the need to focus on customers and to realize that a startup a significant multi-year commitment.
Successful Entrepreneurs Focus on Customers Not Startup Mechanics
The way to succeed in a startup is not to be an expert on startups, but to be an expert on your users and the problem you’re solving for them. Mark Zuckerberg didn’t succeed because he was an expert on startups. He succeeded despite being a complete noob at startups, because he understood his users really well.
What’s interesting is that there seems to be very little on how to understand customer needs and the importance of understanding the difference between users and customers in Graham’s other essays. He writes a lot on investors, fostering growth, managing a startup, among a variety of topics, but spends very little time talking about how to understand customers.
In fact, I worry it’s not merely unnecessary to learn in great detail about the mechanics of startups, but possibly somewhat dangerous. If I met an undergrad who knew all about convertible notes and employee agreements and (God forbid) class FF stock, I wouldn’t think “here is someone who is way ahead of their peers.” It would set off alarms. Because another of the characteristic mistakes of young founders is to go through the motions of starting a startup. They make up some plausible-sounding idea, raise money at a good valuation, rent a cool office, hire a bunch of people. From the outside that seems like what startups do. But the next step after rent a cool office and hire a bunch of people is: gradually realize how completely fucked they are, because while imitating all the outward forms of a startup they have neglected the one thing that’s actually essential: making something people want.
We saw this happen so often that we made up a name for it: playing house. Eventually I realized why it was happening. The reason young founders go through the motions of starting a startup is because that’s what they’ve been trained to do for their whole lives up to that point.
“Playing House” topics and questions are common on news.ycombinator.com but much less effort is devoted to determining what people want and are willing to pay for. The Ycombinator screening process seems to focus on demonstrated aptitude for technical accomplishment and a plan for rapid growth in revenue (or users) but doesn’t ask what the founders have done to understand their market or customer’s needs.
How To Understand Customers
The closest he comes to offering practical advice on understanding customers is in his 2005 essay “How To Start a Startup.”
How do you figure out what customers want? Watch them. One of the best places to do this was at trade shows. Trade shows didn’t pay as a way of getting new customers, but they were worth it as market research. […]
No matter what kind of startup you start, it will probably be a stretch for you, the founders, to understand what users want. [..]
If you want ideas for startups, one of the most valuable things you could do is find a middle-sized non-technology company and spend a couple weeks just watching what they do with computers. […]
Start by writing software for smaller companies, because it’s easier to sell to them. […]
They’re the more strategically valuable part of the market anyway. 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. […] If you build the simple, inexpensive option, you’ll not only find it easier to sell at first, but you’ll also be in the best position to conquer the rest of the market.
Watching people in an artificial environment (trade show) or in their place of business can teach you a lot. But he never seems to suggest that you could actually talk to customers and learn something. And most of the time he talks about “users” not “customers” which will cause confusion as to who will sign the check, even if calling on a small company.
Related Blog Posts
- Paul Graham (2009) What Startups are Really Like is an earlier version of “Before the Startup” given to Startup School 2009.
- Paul Graham (2006) “A Student’s Guide To Startups” is an even earlier version. The 2014 versions seems to explicitly back away from the idea that doing a startup is a good idea for most entrepreneurs, primarily due to the opportunity cost.
- Paul Graham’s Six Principles For Making New Things
- Startups Should Focus on Impact and Innovation Before Growth
- Conversations with Prospects: Practice, Review, Share Notes, Ask for Feedback