April 2006(This essay is derived from a talk at the 2006 Startup School.)The startups we've funded so far are pretty quick, but they seemquicker to learn some lessons than others. I think it's becausesome things about startups are kind of counterintuitive.We've now invested in enough companies that I've learned a trickfor determining which points are the counterintuitive ones:they're the ones I have to keep repeating.So I'm going to number these points, and maybe with future startupsI'll be able to pull off a form of Huffman coding. I'll make themall read this, and then instead of nagging them in detail, I'lljust be able to say: number four!1. Release Early.The thing I probably repeat most is this recipe for a startup: geta version 1 out fast, then improve it based on users' reactions.By "release early" I don't mean you should release something fullof bugs, but that you should release something minimal. Users hatebugs, but they don't seem to mind a minimal version 1, if there'smore coming soon.There are several reasons it pays to get version 1 done fast. Oneis that this is simply the right way to write software, whether fora startup or not. I've been repeating that since 1993, and I haven't seen much since tocontradict it. I've seen a lot of startups die because they weretoo slow to release stuff, and none because they were too quick.[1]One of the things that will surprise you if you build somethingpopular is that you won't know your users. Reddit now has almost half a millionunique visitors a month. Who are all those people? They have noidea. No web startup does. And since you don't know your users,it's dangerous to guess what they'll like. Better to releasesomething and let them tell you.Wufoo took this to heart and releasedtheir form-builder before the underlying database. You can't evendrive the thing yet, but 83,000 people came to sit in the driver'sseat and hold the steering wheel. And Wufoo got valuable feedbackfrom it: Linux users complained they used too much Flash, so theyrewrote their software not to. If they'd waited to release everythingat once, they wouldn't have discovered this problem till it wasmore deeply wired in.Even if you had no users, it would still be important to releasequickly, because for a startup the initial release acts as a shakedowncruise. If anything major is broken-- if the idea's no good,for example, or the founders hate one another-- the stress of gettingthat first version out will expose it. And if you have such problemsyou want to find them early.Perhaps the most important reason to release early, though, is thatit makes you work harder. When you're working on something thatisn't released, problems are intriguing. In something that's outthere, problems are alarming. There is a lot more urgency once yourelease. And I think that's precisely why people put it off. Theyknow they'll have to work a lot harder once they do. [2]2. Keep Pumping Out Features.Of course, "release early" has a second component, without whichit would be bad advice. If you're going to start with somethingthat doesn't do much, you better improve it fast.What I find myself repeating is "pump out features." And this ruleisn't just for the initial stages. This is something all startupsshould do for as long as they want to be considered startups.I don't mean, of course, that you should make your application evermore complex. By "feature" I mean one unit of hacking-- one quantumof making users' lives better.As with exercise, improvements beget improvements. If you run everyday, you'll probably feel like running tomorrow. But if you skiprunning for a couple weeks, it will be an effort to drag yourselfout. So it is with hacking: the more ideas you implement, the moreideas you'll have. You should make your system better at least insome small way every day or two.This is not just a good way to get development done; it is also aform of marketing. Users love a site that's constantly improving.In fact, users expect a site to improve. Imagine if you visited asite that seemed very good, and then returned two months later andnot one thing had changed. Wouldn't it start to seem lame? [3]They'll like you even better when you improve in response to theircomments, because customers are used to companies ignoring them.If you're the rare exception-- a company that actually listens--you'll generate fanatical loyalty. You won't need to advertise,because your users will do it for you.This seems obvious too, so why do I have to keep repeating it? Ithink the problem here is that people get used to how things are.Once a product gets past the stage where it has glaring flaws, youstart to get used to it, and gradually whatever features it happensto have become its identity. For example, I doubt many people atYahoo (or Google for that matter) realized how much better web mailcould be till Paul Buchheit showed them.I think the solution is to assume that anything you've made is farshort of what it could be. Force yourself, as a sort of intellectualexercise, to keep thinking of improvements. Ok, sure, what youhave is perfect. But if you had to change something, what wouldit be?If your product seems finished, there are two possible explanations:(a) it is finished, or (b) you lack imagination. Experience suggests(b) is a thousand times more likely.3. Make Users Happy.Improving constantly is an instance of a more general rule: makeusers happy. One thing all startups have in common is that theycan't force anyone to do anything. They can't force anyone to usetheir software, and they can't force anyone to do deals with them.A startup has to sing for its supper. That's why the successfulones make great things. They have to, or die.When you're running a startup you feel like a little bit of debrisblown about by powerful winds. The most powerful wind is users.They can either catch you and loft you up into the sky, as they didwith Google, or leave you flat on the pavement, as they do withmost startups. Users are a fickle wind, but more powerful than anyother. If they take you up, no competitor can keep you down.As a little piece of debris, the rational thing for you to do isnot to lie flat, but to curl yourself into a shape the wind willcatch.I like the wind metaphor because it reminds you how impersonal thestream of traffic is. The vast majority of people who visit yoursite will be casual visitors. It's them you have to design yoursite for. The people who really care will find what they want bythemselves.The median visitor will arrive with their finger poised on the Backbutton. Think about your own experience: most links youfollow lead to something lame. Anyone who has used the web formore than a couple weeks has been trained to click on Back afterfollowing a link. So your site has to say "Wait! Don't click onBack. This site isn't lame. Look at this, for example."There are two things you have to do to make people pause. The mostimportant is to explain, as concisely as possible, what the hellyour site is about. How often have you visited a site that seemedto assume you already knew what they did? For example, the corporatesite that says thecompany makes enterprise content management solutions for business that enable organizations to unify people, content and processes to minimize business risk, accelerate time-to-value and sustain lower total cost of ownership.An established company may get away with such an opaque description,but no startup can. A startupshould be able to explain in one or two sentences exactly what itdoes. [4]And not just to users. You need this for everyone:investors, acquirers, partners, reporters, potential employees, andeven current employees. You probably shouldn't even start a companyto do something that can't be described compellingly in one or twosentences.The other thing I repeat is to give people everything you've got,right away. If you have something impressive, try to put it on thefront page, because that's the only one most visitors will see.Though indeed there's a paradox here: the more you push the goodstuff toward the front, the more likely visitors are to explorefurther. [5]In the best case these two suggestions get combined: you tellvisitors what your site is about by showing them. One of thestandard pieces of advice in fiction writing is "show, don't tell."Don't say that a character's angry; have him grind his teeth, orbreak his pencil in half. Nothing will explain what your site doesso well as using it.The industry term here is "conversion." The job of your site isto convert casual visitors into users-- whatever your definitionof a user is. You can measure this in your growth rate. Eitheryour site is catching on, or it isn't, and you must know which. Ifyou have decent growth, you'll win in the end, no matter how obscureyou are now. And if you don't, you need to fix something.4. Fear the Right Things.Another thing I find myself saying a lot is "don't worry." Actually,it's more often "don't worry about this; worry about that instead."Startups are right to be paranoid, but they sometimes fear the wrongthings.Most visible disasters are not so alarming as they seem. Disastersare normal in a startup: a founder quits, you discover a patentthat covers what you're doing, your servers keep crashing, you runinto an insoluble technical problem, you have to change your name,a deal falls through-- these are all par for the course. They won'tkill you unless you let them.Nor will most competitors. A lot of startups worry "what if Googlebuilds something like us?" Actually big companies are not the onesyou have to worry about-- not even Google. The people at Googleare smart, but no smarter than you; they're not as motivated, becauseGoogle is not going to go out of business if this one product fails;and even at Google they have a lot of bureaucracy to slow them down.What you should fear, as a startup, is not the established players,but other startups you don't know exist yet. They're way moredangerous than Google because, like you, they're cornered animals.Looking just at existing competitors can give you a false sense ofsecurity. You should compete against what someone else could bedoing, not just what you can see people doing. A corollary is thatyou shouldn't relax just because you have no visible competitorsyet. No matter what your idea, there's someone else out thereworking on the same thing.That's the downside of it being easier to start a startup: more peopleare doing it. But I disagree with Caterina Fake when she says thatmakes this a bad time to start a startup. More people are startingstartups, but not as many more as could. Most college graduatesstill think they have to get a job. The average person can't ignoresomething that's been beaten into their head since they were threejust because serving web pages recently got a lot cheaper.And in any case, competitors are not the biggest threat. Way morestartups hose themselves than get crushed by competitors. Thereare a lot of ways to do it, but the three main ones are internaldisputes, inertia, and ignoring users. Each is, by itself, enoughto kill you. But if I had to pick the worst, it would be ignoringusers. If you want a recipe for a startup that's going to die,here it is: a couple of founders who have some great idea they knoweveryone is going to love, and that's what they're going to build,no matter what.Almost everyone's initial plan is broken. If companies stuck totheir initial plans, Microsoft would be selling programming languages,and Apple would be selling printed circuit boards. In both casestheir customers told them what their business should be-- and theywere smart enough to listen.As Richard Feynman said, the imagination of nature is greater thanthe imagination of man. You'll find more interesting things bylooking at the world than you could ever produce just by thinking.This principle is very powerful. It's why the best abstract paintingstill falls short of Leonardo, for example. And it applies tostartups too. No idea for a product could ever be so clever as theones you can discover by smashing a beam of prototypes into a beamof users.5. Commitment Is a Self-Fulfilling Prophecy.I now have enough experience with startups to be able to say whatthe most important quality is in a startup founder, and it's notwhat you might think. The most important quality in a startupfounder is determination. Not intelligence-- determination.This is a little depressing. I'd like to believe Viaweb succeededbecause we were smart, not merely determined. A lot of people inthe startup world want to believe that. Not just founders, butinvestors too. They like the idea of inhabiting a world ruled byintelligence. And you can tell they really believe this, becauseit affects their investment decisions.Time after time VCs invest in startups founded by eminent professors.This may work in biotech, where a lot of startups simply commercializeexisting research, but in software you want to invest in students,not professors. Microsoft, Yahoo, and Google were all founded bypeople who dropped out of school to do it. What students lack inexperience they more than make up in dedication.Of course, if you want to get rich, it's not enough merely to bedetermined. You have to be smart too, right? I'd like to thinkso, but I've had an experience that convinced me otherwise: I spentseveral years living in New York.You can lose quite a lot in the brains department and it won't killyou. But lose even a little bit in the commitment department, andthat will kill you very rapidly.Running a startup is like walking on your hands: it's possible, butit requires extraordinary effort. If an ordinary employee wereasked to do the things a startup founder has to, he'd be veryindignant. Imagine if you were hired at some big company, and inaddition to writing software ten times faster than you'd ever hadto before, they expected you to answer support calls, administerthe servers, design the web site, cold-call customers, find thecompany office space, and go out and get everyone lunch.And to do all this not in the calm, womb-like atmosphere of a bigcompany, but against a backdrop of constant disasters. That's thepart that really demands determination. In a startup, there'salways some disaster happening. So if you're the least bit inclinedto find an excuse to quit, there's always one right there.But if you lack commitment, chances are it will have been hurtingyou long before you actually quit. Everyone who deals with startupsknows how important commitment is, so if they sense you're ambivalent,they won't give you much attention. If you lack commitment, you'lljust find that for some mysterious reason good things happen toyour competitors but not to you. If you lack commitment, it willseem to you that you're unlucky.Whereas if you're determined to stick around, people will payattention to you, because odds are they'll have to deal with youlater. You're a local, not just a tourist, so everyone has to cometo terms with you.At Y Combinator we sometimes mistakenly fund teams who have theattitude that they're going to give this startup thing a shot forthree months, and if something great happens, they'll stick withit-- "something great" meaning either that someone wants to buythem or invest millions of dollars in them. But if this is yourattitude, "something great" is very unlikely to happen to you,because both acquirers and investors judge you by your level ofcommitment.If an acquirer thinks you're going to stick around no matter what,they'll be more likely to buy you, because if they don't and youstick around, you'll probably grow, your price will go up, andthey'll be left wishing they'd bought you earlier. Ditto forinvestors. What really motivates investors, even big VCs, is notthe hope of good returns, but the fear of missing out. [6]So ifyou make it clear you're going to succeed no matter what, and the onlyreason you need them is to make it happen a little faster, you'remuch more likely to get money.You can't fake this. The only way to convince everyone that you'reready to fight to the death is actually to be ready to.You have to be the right kind of determined, though. I carefullychose the word determined rather than stubborn, because stubbornnessis a disastrous quality in a startup. You have to be determined,but flexible, like a running back. A successful running back doesn'tjust put his head down and try to run through people. He improvises:if someone appears in front of him, he runs around them; if someonetries to grab him, he spins out of their grip; he'll even run inthe wrong direction briefly if that will help. The one thing he'llnever do is stand still. [7]6. There Is Always Room.I was talking recently to a startup founder about whether it mightbe good to add a social component to their software. He said hedidn't think so, because the whole social thing was tapped out.Really? So in a hundred years the only social networking siteswill be the Facebook, MySpace, Flickr, and Del.icio.us? Not likely.There is always room for new stuff. At every point in history,even the darkest bits of the dark ages, people were discoveringthings that made everyone say "why didn't anyone think of thatbefore?" We know this continued to be true up till 2004, when theFacebook was founded-- though strictly speaking someone else didthink of that.The reason we don't see the opportunities all around us is that weadjust to however things are, and assume that's how things have tobe. For example, it would seem crazy to most people to try to makea better search engine than Google. Surely that field, at least,is tapped out. Really? In a hundred years-- or even twenty-- arepeople still going to search for information using something likethe current Google? Even Google probably doesn't think that.In particular, I don't think there's any limit to the number ofstartups. Sometimes you hear people saying "All these guys startingstartups now are going to be disappointed. How many little startupsare Google and Yahoo going to buy, after all?" That sounds cleverlyskeptical, but I can prove it's mistaken. No one proposes thatthere's some limit to the number of people who can be employed inan economy consisting of big, slow-moving companies with a couplethousand people each. Why should there be any limit to the numberwho could be employed by small, fast-moving companies with ten each?It seems to me the only limit would be the number of people whowant to work that hard.The limit on the number of startups is not the number that can getacquired by Google and Yahoo-- though it seems even that shouldbe unlimited, if the startups were actually worth buying-- but theamount of wealth that can be created. And I don't think there'sany limit on that, except cosmological ones.So for all practical purposes, there is no limit to the number ofstartups. Startups make wealth, which means they make things peoplewant, and if there's a limit on the number of things people want,we are nowhere near it. I still don't even have a flying car.7. Don't Get Your Hopes Up.This is another one I've been repeating since long before Y Combinator.It was practically the corporate motto at Viaweb.Startup founders are naturally optimistic. They wouldn't do itotherwise. But you should treat your optimism the way you'd treatthe core of a nuclear reactor: as a source of power that's alsovery dangerous. You have to build a shield around it, or it willfry you.The shielding of a reactor is not uniform; the reactor would beuseless if it were. It's pierced in a few places to let pipes in.An optimism shield has to be pierced too. I think the place todraw the line is between what you expect of yourself, and what youexpect of other people. It's ok to be optimistic about what youcan do, but assume the worst about machines and other people.This is particularly necessary in a startup, because you tend tobe pushing the limits of whatever you're doing. So things don'thappen in the smooth, predictable way they do in the rest of theworld. Things change suddenly, and usually for the worse.Shielding your optimism is nowhere more important than with deals.If your startup is doing a deal, just assume it's not going tohappen. The VCs who say they're going to invest in you aren't.The company that says they're going to buy you isn't. The bigcustomer who wants to use your system in their whole company won't.Then if things work out you can be pleasantly surprised.The reason I warn startups not to get their hopes up is not to savethem from being disappointed when things fall through. It'sfor a more practical reason: to prevent them from leaning theircompany against something that's going to fall over, taking themwith it.For example, if someone says they want to invest in you, there's anatural tendency to stop looking for other investors. That's whypeople proposing deals seem so positive: they want you tostop looking. And you want to stop too, because doing deals is apain. Raising money, in particular, is a huge time sink. So youhave to consciously force yourself to keep looking.Even if you ultimately do the first deal, it will be to your advantageto have kept looking, because you'll get better terms. Deals aredynamic; unless you're negotiating with someone unusually honest,there's not a single point where you shake hands and the deal'sdone. There are usually a lot of subsidiary questions to be clearedup after the handshake, and if the other side senses weakness-- ifthey sense you need this deal-- they will be very tempted to screwyou in the details.VCs and corp dev guys are professional negotiators. They're trainedto take advantage of weakness. [8]So while they're often niceguys, they just can't help it. And as pros they do this more thanyou. So don't even try to bluff them. The only way a startup canhave any leverage in a deal is genuinely not to need it. And ifyou don't believe in a deal, you'll be less likely to depend on it.So I want to plant a hypnotic suggestion in your heads: when youhear someone say the words "we want to invest in you" or "we wantto acquire you," I want the following phrase to appear automaticallyin your head: don't get your hopes up. Just continue runningyour company as if this deal didn't exist. Nothing is more likelyto make it close.The way to succeed in a startup is to focus on the goal of gettinglots of users, and keep walking swiftly toward it while investorsand acquirers scurry alongside trying to wave money in your face.Speed, not MoneyThe way I've described it, starting a startup sounds pretty stressful.It is. When I talk to the founders of the companies we've funded,they all say the same thing: I knew it would be hard, but I didn'trealize it would be this hard.So why do it? It would be worth enduring a lot of pain and stressto do something grand or heroic, but just to make money? Is makingmoney really that important?No, not really. It seems ridiculous to me when people take businesstoo seriously. I regard making money as a boring errand to be gotout of the way as soon as possible. There is nothing grand orheroic about starting a startup per se.So why do I spend so much time thinking about startups? I'll tellyou why. Economically, a startup is best seen not as a way to getrich, but as a way to work faster. You have to make a living, anda startup is a way to get that done quickly, instead of letting itdrag on through your whole life.[9]We take it for granted most of the time, but human life is fairlymiraculous. It is also palpably short. You're given this marvellousthing, and then poof, it's taken away. You can see why peopleinvent gods to explain it. But even to people who don't believein gods, life commands respect. There are times in most of ourlives when the days go by in a blur, and almost everyone has asense, when this happens, of wasting something precious. As BenFranklin said, if you love life, don't waste time, because time iswhat life is made of.So no, there's nothing particularly grand about making money. That'snot what makes startups worth the trouble. What's important aboutstartups is the speed. By compressing the dull but necessary taskof making a living into the smallest possible time, you show respectfor life, and there is something grand about that.Notes[1]Startups can die from releasing something full of bugs, and notfixing them fast enough, but I don't know of any that died fromreleasing something stable but minimal very early, then promptlyimproving it.[2]I know this is why I haven't released Arc. The moment I do,I'll have people nagging me for features.[3]A web site is different from a book or movie or desktop applicationin this respect. Users judge a site not as a single snapshot, butas an animation with multiple frames. Of the two, I'd say the rate ofimprovement is more important to users than where you currentlyare.[4]It should not always tell this to users, however. For example,MySpace is basically a replacement mall for mallrats. But it waswiser for them, initially, to pretend that the site was about bands.[5]Similarly, don't make users register to try your site. Maybewhat you have is so valuable that visitors should gladly registerto get at it. But they've been trained to expect the opposite.Most of the things they've tried on the web have sucked-- andprobably especially those that made them register.[6]VCs have rational reasons for behaving this way. They don'tmake their money (if they make money) off their median investments.In a typical fund, half the companies fail, most of the rest generatemediocre returns, and one or two "make the fund" by succeedingspectacularly. So if they miss just a few of the most promisingopportunities, it could hose the whole fund.[7]The attitude of a running back doesn't translate to soccer.Though it looks great when a forward dribbles past multiple defenders,a player who persists in trying such things will do worse in thelong term than one who passes.[8]The reason Y Combinator never negotiates valuationsis that we're not professional negotiators, and don't want to turninto them.[9]There are two ways to do work you love: (a) to make money, then workon what you love, or (b) to get a job where you get paid to work onstuff you love. In practice the first phases of bothconsist mostly of unedifying schleps, and in (b) the second phase is lesssecure.Thanks to Sam Altman, Trevor Blackwell, Beau Hartshorne, Jessica Livingston, and Robert Morris for reading drafts of this.
