Image via Wikipedia"If you're investing in a startup at a $10 million valuation, you're not saying it's actually worth $10 million … You're saying it has a 1% chance of being worth a billion."- Paul Graham
March 25: Stern: Entrepreneurs Exchange Summit
TechCrunch: If Execution Is What Matters, Where Does That Leave Ideas?: the process of getting a great product out there is a vital part of what constitutes innovation in the first place.The saying that it is not the idea, it is the execution is cliche in the industry. I am going to argue to the contrary. Ideas matter. Big, unsexy companies execute all the time. When a Marco leave a Tumblr to launch an Instapaper, that is not to say he got dissatisfied with Tumblr's execution, and decided he could do a better job at it, and so he left. It was not about the execution. Tumblr's execution is the most sophisticated it has ever been. He left for the idea.
When a Google gets too big, some of the most entrepreneurial people simply leave. Several people left Facebook to start Path and Quora, among others. It was not about execution, it was about the idea. Are you pushing at the edges with your idea? How hard are you pushing?
But execution matters. Bill Gates left Harvard for "an idea whose time had come." But once he did leave, he had to execute. He had to write the code, he had to build the team, he had to establish business relationships and distribution channels.
Of course execution matters. You have to make it happen. But ideas matter. Ideas are what you start with. Ideas are what keep giving you your edge. Unless you are pushing the paradigms, you are simply pushing paper. Excuse the outdated metaphor. Sorry Marco.
It is both about the idea and the execution, but it starts with the idea. And it continues to be about the idea through the execution. The idea is the soul. The execution is the muscle.
Startups that are strong on the idea tend to be a little chaotic in their ways as they go about their execution, because things stay hazy. It is from that haze that pivots happen.
And by the way, the twins had no idea, they were and are automatons rowing boats.
Paul Graham, 2008: Startup Ideas We'd Like to Fund
When we read Y Combinator applications there are always ideas we're hoping to see. ...... recipes for ideas are the most useful form anyway, because imaginative people will take them in directions we didn't anticipate. ....... Many of the best startups we've funded, like Loopt, proposed things we'd never considered. ...... Something is broken when Sony and Universal are suing children. Actually, at least two things are broken: the software that file sharers use, and the record labels' business model. ....... The answer for the music industry, for example, is probably to give up insisting on payment for recorded music and focus on licensing and live shows. But what happens to movies? Do they morph into games? ....... the old media call everything published online a "blog" ....... Enterprise software companies sell bad software for huge amounts of money. ....... if you study different parts of the enterprise software business (not just what the software does, but more importantly, how it's sold) you'll find parts that could be picked off by startups. ...... CRM ("Customer Relationship Management") means all sorts of different things, but a lot of the current embodiments don't seem much more than mailing list managers. It should be possible to make interactions with customers much higher-res. ...... Many of the best startups happened when someone needed something in their work, found it didn't exist, and quit to build it. ...... As much as people like to share words (IM and email and blogging are "word sharing" apps), they probably like to share pictures more. ...... There may ultimately be 30 different subtypes of image/video sharing service, half of which remain to be discovered....... building web-based Office variants ...... Advertising could be made much better ..... What we have now is basically print and TV advertising translated to the web. The right answer will probably look very different. It might not even seem like advertising, by current standards. So the way to approach this problem is probably to start over from scratch ...... Bonus points if you can invent new forms of advertising whose effects are measurable, above all in sales. ...... Till recently, schools, like newspapers, had geographical monopolies. But the web changes that. ....... there are some big problems that may be soluble if we can measure more ....... once an organization gets big enough that people on in the interior are protected from market forces, politics starts to rule, instead of performance ...... Google doesn't have a lot of weaknesses. One of the biggest is that they have no sense of design ...... Like news, shopping used to be constrained by geography ..... People often use Excel as a lightweight database. I suspect there's an opportunity to create the program such users wish existed, and that there are new things you could do if it were web-based. ........ There is room to do to Wikipedia what Wikipedia did to Britannica. ....... A lot of companies (to say nothing of government agencies) have appalling customer service. "Please stay on the line. Your call is important to us." ...... Craiglist is ambivalent about being a business. ...... Skype and Tokbox are just the beginning. There's going to be a lot of evolution in this area, especially on mobile devices. ...... There's a lot of low-hanging fruit in hardware ....... Hardware is already mostly software ...... most hackers are afraid of hardware, and most hardware companies can't write good software ....... Fixing email overload ..... Startups for startups ..... Some of the best ideas are outliers everyone ignores because they seem crazy. ..... ortrait of a startup: a combination of relentless predator upon the obsolete and benevolent solver of the world's problems ...... Startups are often ruthless competitors, but they're competing in a game won by making what people wantMegaBizFlakes: How To Transform Your Business Startup Idea into A Reality
The hardest part for many entrepreneurs is executing their idea ...... The more time you waste on a business startup idea, the more the idea will be dying or someone else will execute it. So, to transform your idea into a reality you must be smart and fast. You don’t know who is thinking about the similar idea with yours ....... keeping your idea to yourself will help do no good. ...... Chatting about your business idea with experts will open your eyes to something’s you never knew ...... Embrace the mindset of sharing your startup idea with people you trust and forget about someone stealing your idea. ...... research on your startup idea. Try to know who your competitors are and what they are lacking in order to implement it so as to stay ahead of them....... if you want to win big in the business world, you must build your team. ....... You need to surround yourself with people who are smarter than you in order to lift you up and help build a great business. ....... try to look for people who will fill up the space you are lacking. ....... Be innovative so as to last long in the business world. .... You have to think outside the box in order to dwell on the mountain top. ...... get your hand dirty by executing the idea. The more time you waste in execution, the faster your startup idea dies. Don’t bother about perfectionPaul Graham, 2005: How To Start A StartUp
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. ...... There is no magically difficult step that requires brilliance to solve. ........ you don't need a brilliant idea to start a startup ..... look at something people are trying to do, and figure out how to do it in a way that doesn't suck. ...... dating sites currently suck far worse than search did before Google ...... If you go to VC firms with a brilliant idea that you'll tell them about if they sign a nondisclosure agreement, most will tell you to get lost. That shows how much a mere idea is worth. ....... Another sign of how little the initial idea is worth is the number of startups that change their plan en route. Microsoft's original plan was to make money selling programming languages ...... What matters is not ideas, but the people who have them. Good people can fix bad ideas, but good ideas can't save bad people. ...... One of the best tricks I learned during our startup was a rule for deciding who to hire. Could you describe the person as an animal? ...... someone who takes their work a little too seriously; someone who does what they do so well that they pass right through professional and cross over into obsessive ...... a PR person who will cold-call New York Times reporters on their cell phones; a graphic designer who feels physical pain when something is two millimeters out of place. ........ You don't need or perhaps even want this quality in big companies, but you need it in a startup. ...... When nerds are unbearable it's usually because they're trying too hard to seem smart. But the smarter they are, the less pressure they feel to act smart. So as a rule you can recognize genuinely smart people by their ability to say things like "I don't know," "Maybe you're right," and "I don't understand x well enough." ........ Like most startups, ours began with a group of friends, and it was through personal contacts that we got most of the people we hired ....... Being friends with someone for even a couple days will tell you more than companies could ever learn in interviews. ...... Ideally you want between two and four founders. It would be hard to start with just one. One person would find the moral weight of starting a company hard to bear. ...... You don't want mere voting; you need unanimity. .......... In a technology startup, which most startups are, the founders should include technical people. ..... what I discovered was that business was no great mystery. It's not something like physics or medicine that requires extensive study. You just try to get people to pay you for stuff. ....... People who don't want to get dragged into some kind of work often develop a protective incompetence at it. ...... After Warren Buffett, you don't hit another MBA till number 22 ...... There are only 5 MBAs in the top 50. What you notice in the Forbes 400 are a lot of people with technical backgrounds. Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Jeff Bezos, Gordon Moore. ....... If you can't understand users .... the single most important issue for technology startups, and the rock that sinks more of them than anything else. ....... restaurants. A large percentage fail, about a quarter in the first year. But can you think of one restaurant that had really good food and went out of business? ..... Restaurants with great food seem to prosper no matter what. A restaurant with great food can be expensive, crowded, noisy, dingy, out of the way, and even have bad service, and people will keep coming. ....... In nearly every failed startup, the real problem was that customers didn't want the product. For most, the cause of death is listed as "ran out of funding," but ...... get a version 1 out as soon as you can ..... The only way to make something customers want is to get a prototype in front of them and refine it based on their reactions. ...... Hackers are so used to computers that they have no idea how horrifying software seems to normal people. Stephen Hawking's editor told him that every equation he included in his book would cut sales in half. ...... A 10% improvement in ease of use doesn't just increase your sales 10%. It's more likely to double your sales. ...... The best odds are in niche markets. Since startups make money by offering people something better than they had before, the best opportunities are where things suck most. And it would be hard to find a place where things suck more than in corporate IT departments. ..... find a middle-sized non-technology company and spend a couple weeks just watching what they do with computers. Most good hackers have no more idea of the horrors perpetrated in these places than rich Americans do of what goes on in Brazilian slums. ..... 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. ........ it's wise to take money from investors. ..... a startup is like a pass/fail course. The way to get rich from a startup is to maximize the company's chances of succeeding, not to maximize the amount of stock you retain. So if you can trade stock for something that improves your odds, it's probably a smart move. ...... To most hackers, getting investors seems like a terrifying and mysterious process. Actually it's merely tedious. ..... you get seed money from individual rich people called "angels." Often they're people who themselves got rich from technology. At the seed stage, investors don't expect you to have an elaborate business plan. Most know that they're supposed to decide quickly. It's not unusual to get a check within a week based on a half-page agreement. ....... a brief description of what you plan to do and how you're going to make money from it, and the resumes of the founders. ...... Merely incorporating yourselves isn't hard. ..... the word "angel" is a metaphor. ...... g. Most rich people are looking for good investments. If you really think you have a chance of succeeding, you're doing them a favor by letting them invest. Mixed with any annoyance they might feel about being approached will be the thought: are these guys the next Google? ........ Eventually we settled on one millon, because Julian said no one would invest in a company with a valuation any lower. ....... Getting money from an actual VC firm is a bigger deal than getting money from angels. The amounts of money involved are larger, millions usually. So the deals take longer, dilute you more, and impose more onerous conditions. ...... I think people who are mature and experienced, with a business background, may be overrated. We used to call these guys "newscasters," because they had neat hair and spoke in deep, confident voices, and generally didn't know much more than they read on the teleprompter. ........ We talked to a number of VCs, but eventually we ended up financing our startup entirely with angel money. The main reason was that we feared a brand-name VC firm would stick us with a newscaster as part of the deal. That might have been ok if he was content to limit himself to talking to the press, but what if he wanted to have a say in running the company? ....... we didn't go public. Back in 1998 our CFO tried to talk me into it. In those days you could go public as a dogfood portal ...... But I feared it would have meant taking on a newscaster- ....... Wall Street learns new languages fast when money is involved. ..... You have more leverage negotiating with VCs than you realize. The reason is other VCs. ...... VCs form a pyramid. At the top are famous ones like Sequoia and Kleiner Perkins, but beneath those are a huge number you've never heard of. What they all have in common is that a dollar from them is worth one dollar. ....... d as you go down the food chain the VCs get rapidly dumber. A few steps down from the top you're basically talking to bankers who've picked up a few new vocabulary words from reading Wired. (Does your product use XML?) So I'd advise you to be skeptical about claims of experience and connections. Basically, a VC is a source of money. I'd be inclined to go with whoever offered the most money the soonest with the least strings attached. ....... Talk to as many VCs as you can, even if you don't want their money ...... The most efficient way to reach VCs, especially if you only want them to know about you and don't want their money, is at the conferences that are occasionally organized for startups to present to them. ....... When and if you get an infusion of real money from investors, what should you do with it? Not spend it, that's what. ...... Google never did any advertising. They're like dealers; they sell the stuff, but they know better than to use it themselves. ........ The founders all learned to do every job in the company. ...... At sales I was not very good. I was persistent, but I didn't have the smoothness of a good salesman. My message to potential customers was: you'd be stupid not to sell online, and if you sell online you'd be stupid to use anyone else's software. Both statements were true, but that's not the way to convince people. ...... I was great at customer support though. Imagine talking to a customer support person who not only knew everything about the product, but would apologize abjectly if there was a bug, and then fix it immediately, while you were on the phone with them. Customers loved us. And we loved them, because when you're growing slow by word of mouth, your first batch of users are the ones who were smart enough to find you by themselves. There is nothing more valuable, in the early stages of a startup, than smart users. If you listen to them, they'll tell you exactly how to make a winning product. And not only will they give you this advice for free, they'll pay you. ....... The slower you burn through your funding, the more time you have to learn. ....... encourage a culture of cheapness ..... For most startups the model should be grad student, not law firm. Aim for cool and cheap, not expensive and impressive ...... An apartment is also the right kind of place for developing software. Cube farms suck for that ....... Ever notice how much easier it is to hack at home than at work? So why not make work more like home? ...... Professional means doing good work, not elevators and glass walls. I'd advise most startups to avoid corporate space at first and just rent an apartment. ...... apartments tend to be in better locations than office buildings ...... The key to productivity is for people to come back to work after dinner. Those hours after the phone stops ringing are by far the best for getting work done. ...... The most important way to not spend money is by not hiring people. ...... people are a recurring expense, which is the worst kind. ..... they slow you down ...... Don't hire people to fill the gaps in some a priori org chart. The only reason to hire someone is to do something you'd like to do but can't. ...... between about 23 and 38 ..... you don't have to be a CS major to be a hacker; I was a philosophy major in college. ...... don't have a lot of meetings; don't have chunks of code that multiple people own; don't have a sales guy running the company; don't make a high-end product; don't let your code get too big; don't leave finding bugs to QA people; don't go too long between releases; don't isolate developers from users; don't move from Cambridge to Route 128 ..... it's hard to repeat a brilliant performance, but it's straightforward to avoid errors ...... Do you actually want to start a startup? What it amounts to, economically, is compressing your working life into the smallest possible space. Instead of working at an ordinary rate for 40 years, you work like hell for four. ...... Build something users love, and spend less than you make. How hard is that?
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