Are you sure you want to start a company? (A Letter to Y Combinator Applicants)

INTRO

Opinions are like earholes – everyone has two of them – so don’t take this as straight facts. I’ll gloss the obvious stuff about building a founding team: everyone has to be smart and at least one person on your team has to be able to build stuff. That said, it’s OK to have a person on your team who does sales or customer development.

Here’s some less obvious stuff: it’s also OK to not yet know how you’re going to make money – you’ll have to figure that out again anyway after you inevitably pivot ‘swivel’, plus a common piece of advice that seemed supported by copious examples is that once you build something enough people need, the money will sort itself out. You also need to be a bit crazy, be able to say no to advice (with justification), and possess THE TRUE SPIRIT OF AN ENTREPRENEUR.

THE SPIRIT OF AN ENTREPRENEUR: PASSION + AN IDEA WORTH BEING PASSIONATE ABOUT

On a more personal note, Y Combinator changed my view of entrepreneurs. I’ll admit that I possess some vaguely Marxist leanings that made me, looking from the outside, skeptical of the culture around startups. Why is there so much materialism? Why is it so competitive? Does anyone actually care about the product they’re making, or is it just the allure of making a ton of money off of some buzz-words and some rails hacking? What about the ‘serial-entrepreneur’ the person jumping from startup to startup, never hitting it big but addicted to – what? – the promise of making it big? Well, ‘startup culture’, in the broadest sense, is kind of seedy and shallow, but Y Combinator does an excellent job of finding people and companies that are not cynical and who do care about changing the world, or at least a slice of it. That drive to make a part of the consumer world better is the mark of the entrepreneur.

I want to talk about something Ron Conway said, which is that “real entrepreneurs aren’t thinking about exits; they’re thinking about changing the world.” This is true. Mark Zuckerberg no longer has to worry about money. He doesn’t care about getting yet richer. $7 billion dollars is almost infinitely wealthy – what matters past that? Yet he’s more excited than ever about Facebook. Whether you agree with his vision or his methods, he has a (benevolent, I believe) vision that he wants to make a reality of collecting a huge amount of data about people and their relationships with each other, with things, and with the world around them. To quantize the world and parts of the human experience. After my 27 minute conversation with him (I timed it), I honestly believe that he’d be working just as hard if Facebook weren’t worth so much and didn’t have the prospect of being worth much, and had only its userbase. Andrew Mason’s Groupon started as a site to enable grass-roots activism. That ended up not working out financially, so he shifted the focus somewhat to create a new, online platform to promote local business, which obviously can be a huge boon to smaller operations outside of large urban areas. He wants to turn Groupon into a billion dollar company, sure, but he could have already sold to Google for multiple billions if he just wanted money. He wants to make spending more equitable towards small business owners. He wants to make people go outside. He is making people go outside. I could go on.

These people have a vision about adjusting human behaviors for users of their sites, which have usercounts in the hundreds of millions. Amazing. These aren’t social-media dummies ‘experts’ selling $500 tweets or startup shops flipping their company in three months in a ‘talent acquisition’ as a lure to get hired with a signing bonus by a company like Google. These are people who want to change a part of the world.

Ask yourself: would you sell your company? Would you sell it for $20 million? If you answered yes, at this stage, find a new idea. You don’t love it enough. Your answer may (read: will) change as the product and market matures but right now this should be your baby and you should care more about your users and changing their lives than about extra zeroes behind a non-zero positive integer on your bank slips. And you probably won’t meet all of your dreams. If you aim for the stars, you might get that $20 million buyout. If you aim for the $20 million buyout you will probably get … bankruptcy.

EDIT: I am not against selling your company! But if you start a company with the exit already in mind, you’re not going to get a buyout offer. You’re going to fail. Paul Graham and Jessica Livingston told this to me and … they were right.

If you said that you would not sell your company, I’d tell you to start working on it, but you’re probably ahead of me already.

A TOUCH OF INSANITY

The first thing to know about starting a company is that it’s kind of an insane thing to do.

On a certain level, there’s really nothing more to it than deciding that it’s a thing. That’s the first crazy part – convincing yourself that an idea is an actual thingThen one starts convincing some other people to help make this thing in to usable thing. Maybe somewhere along the way this thing accrues other people’s money either by delivering something they want or by convincing investors that this thing is going to be an even bigger thing in the future. If you’re lucky, a lot of people will like your thing and oh but wait – what are you doing and how did you get 500k users? Guess you’ll have to figure it out on your own.

This can be a disconcerting feeling since we spend our educational life and employed life being carefully shepherded, and we’re used to always having someone to ask about the right thing to do.

THE ABILITY TO SAY NO BACKED BY A MASTERY OF A DOMAIN OF KNOWLEDGE

You have to be a master of the domain that your product targets. Your slice can be small, but your mastery has to be deep. You can’t claim to master consumer web applications, but I will believe that you have mastered consumer web applications for tracking finances. And I mean master – you have to know every relevant competitor, the market, your users, sales tactics, service providers, everthing.

This is important because you’re going to get a ton of advice during Y Combinator. Some of it will be from your peers, who are all very smart. Lots of it will be from the Y Combinator team, which is composed of people who are both very smart and very rich. And I haven’t even mentioned the weekly speakers, your angel advisors, the Sequoia mentors, etc. Point being, you are going to receive tons of advice from people you respect. The unfortunate part is that some of this advice will be wrong. It’s not due to maliciousness; it’s simply impossible to be a master in every domain. So take each piece of advice as a fresh view from someone from a different domain, evaluate it, debate it (providing your domain context to the advice-giver), and make a decision yourself. If you take everyone’s advice, your product is going to be undercooked and unfocused. You have to say no sometimes, even to people you admire, if it’s the right thing for your product.

CONCLUSION

Remember that Y Combinator is not magic. It is a very powerful catalyst. You still need to make things happen yourself with your vision, hard work, a good team, correct decisions, and more than a bit of luck. I wish you all the best of luck.