October 2006
(This essay is derived from a talk at MIT.)
Till recently graduating seniors had two choices: get a job or go
to grad school. I think there will increasingly be a third option:
to start your own startup. But how common will that be?
I'm sure the default will always be to get a job, but starting a
startup could well become as popular as grad school. In the late
90s my professor friends used to complain that they couldn't get
grad students, because all the undergrads were going to work for
startups. I wouldn't be surprised if that situation returns, but
with one difference: this time they'll be starting their own
instead of going to work for other people's.
The most ambitious students will at this point be asking: Why wait
till you graduate? Why not start a startup while you're in college?
In fact, why go to college at all? Why not start a startup instead?
A year and a half ago I gave a talk
where I said that the average age of the founders of
Yahoo, Google, and Microsoft was 24, and that if grad students could
start startups, why not undergrads? I'm glad I phrased that as a
question, because now I can pretend it wasn't merely a rhetorical
one. At the time I couldn't imagine why there should be any lower
limit for the age of startup founders. Graduation is a bureaucratic
change, not a biological one. And certainly there are undergrads
as competent technically as most grad students. So why shouldn't
undergrads be able to start startups as well as grad students?
I now realize that something does change at graduation: you lose a
huge excuse for failing. Regardless of how complex your life is,
you'll find that everyone else, including your family and friends,
will discard all the low bits and regard you as having a single
occupation at any given time. If you're in college and have a
summer job writing software, you still read as a student. Whereas
if you graduate and get a job programming, you'll be instantly
regarded by everyone as a programmer.
The problem with starting a startup while you're still in school
is that there's a built-in escape hatch. If you start a startup
in the summer between your junior and senior year, it reads to
everyone as a summer job.
So if it goes nowhere, big deal; you return to school in the
fall with all the other seniors; no one regards you as a failure,
because your occupation is student, and you didn't fail at that.
Whereas if you start a startup just one year later, after you
graduate, as long as you're not accepted to grad school in the fall
the startup reads to everyone as your occupation. You're
now a startup founder, so you have to do well at that.
For nearly everyone, the opinion of one's peers is the most powerful
motivator of all—more powerful even than the nominal goal of most
startup founders, getting rich.
[1]
About a month into each funding
cycle we have an event called Prototype Day where each startup
presents to the others what they've got so far. You might think
they wouldn't need any more motivation. They're working on their
cool new idea; they have funding for the immediate future; and
they're playing a game with only two outcomes: wealth or failure.
You'd think that would be motivation enough. And yet the prospect
of a demo pushes most of them into a
rush of activity.
Even if you start a startup explicitly to get rich, the money you
might get seems pretty theoretical most of the time. What drives
you day to day is not wanting to look bad.
You probably can't change that. Even if you could, I don't think
you'd want to; someone who really, truly doesn't care what his peers
think of him is probably a psychopath. So the best you can do is
consider this force like a wind, and set up your boat accordingly.
If you know your peers are going to push you in some direction,
choose good peers, and position yourself so they push you in a
direction you like.
Graduation changes the prevailing winds, and those make a difference.
Starting a startup is so hard
that it's a close call even for the ones that succeed. However
high a startup may be flying now, it probably has a few leaves stuck
in the landing gear from those trees it barely cleared at the end
of the runway. In such a close game, the smallest increase in the
forces against you can be enough to flick you over the edge into
failure.
When we first started Y Combinator
we encouraged people to start
startups while they were still in college. That's partly because
Y Combinator began as a kind of summer program. We've kept the
program shape—all of us having dinner together once a week turns
out to be a good idea—but we've decided now
that the party line should be to tell people to wait till they
graduate.
Does that mean you can't start a startup in college? Not at all.
Sam Altman, the co-founder of Loopt,
had just finished his sophomore year when we funded them, and Loopt
is probably the most promising of all the startups we've funded so
far. But Sam Altman is a very unusual guy. Within about three
minutes of meeting him, I remember thinking "Ah, so this is what
Bill Gates must have been like when he was 19."
If it can work to start a startup during college, why do
we tell people not to? For the same reason that the probably
apocryphal violinist, whenever he was asked to judge someone's
playing, would always say they didn't have enough talent to make
it as a pro. Succeeding as a musician takes determination as well
as talent, so this answer works out to be the right advice for
everyone. The ones who are uncertain believe it and give up, and
the ones who are sufficiently determined think "screw that, I'll
succeed anyway."
So our official policy now is only to fund undergrads we can't talk
out of it. And frankly, if you're not certain, you should wait.
It's not as if all the opportunities to start companies are going
to be gone if you don't do it now. Maybe the window will close on
some idea you're working on, but that won't be the last idea you'll
have. For every idea that times out, new ones become feasible.
Historically the opportunities to start startups have only increased
with time.
In that case, you might ask, why not wait longer? Why not go work
for a while, or go to grad school, and then start a startup? And
indeed, that might be a good idea. If I had to pick the sweet spot
for startup founders, based on who we're most excited to see
applications from, I'd say it's probably the mid-twenties. Why?
What advantages does someone in their mid-twenties have over someone
who's 21? And why isn't it older? What can 25 year olds do that
32 year olds can't? Those turn out to be questions worth examining.
Plus
If you start a startup soon after college, you'll be a young founder
by present standards, so you should know what the relative advantages
of young founders are. They're not what you might think. As a
young founder your strengths are: stamina, poverty, rootlessness,
colleagues, and ignorance.
The importance of stamina shouldn't be surprising. If you've heard
anything about startups you've probably heard about the long hours.
As far as I can tell these are universal. I can't think of any
successful startups whose founders worked 9 to 5. And it's
particularly necessary for younger founders to work long hours
because they're probably not as efficient as they'll be later.
Your second advantage, poverty, might not sound like an advantage,
but it is a huge one. Poverty implies you can live cheaply,
and this is critically important for startups. Nearly every startup
that fails, fails by running out of money. It's a little misleading
to put it this way, because there's usually some other underlying
cause. But regardless of the source of your problems, a low burn
rate gives you more opportunity to recover from them. And since
most startups make all kinds of mistakes at first, room to recover
from mistakes is a valuable thing to have.
Most startups end up doing something different than they planned.
The way the successful ones find something that works is by trying
things that don't. So the worst thing you can do in a startup is
to have a rigid, pre-ordained plan and then start spending a lot
of money to implement it. Better to operate cheaply and give your
ideas time to evolve.
Recent grads can live on practically nothing, and this gives you
an edge over older founders, because the main cost in software
startups is people. The guys with kids and mortgages are at a
real disadvantage. This is one reason I'd bet on the 25 year old
over the 32 year old. The 32 year old probably is a better programmer,
but probably also has a much more expensive life. Whereas a 25
year old has some work experience (more on that later) but can live
as cheaply as an undergrad.
Robert Morris and I were 29 and 30 respectively when we started
Viaweb, but fortunately we still lived like 23 year olds. We both had
roughly zero assets. I would have loved to have a mortgage,
since that would have meant I had a house. But in retrospect
having nothing turned out to be convenient. I wasn't tied down and
I was used to living cheaply.
Even more important than living cheaply, though, is thinking cheaply.
One reason the Apple II was so popular was that it was cheap. The
computer itself was cheap, and it used cheap, off-the-shelf peripherals
like a cassette tape recorder for data storage and a TV as a monitor.
And you know why? Because Woz designed this computer for himself,
and he couldn't afford anything more.
We benefitted from the same phenomenon. Our prices were
daringly low for the time. The top level of service was
300ドル a month, which was an order of magnitude below the norm. In
retrospect this was a smart move, but we didn't do it because we
were smart. 300ドル a month seemed like a lot of money to us. Like
Apple, we created something inexpensive, and therefore popular,
simply because we were poor.
A lot of startups have that form: someone comes along and makes
something for a tenth or a hundredth of what it used to cost, and
the existing players can't follow because they don't even want to
think about a world in which that's possible. Traditional long
distance carriers, for example, didn't even want to think about
VoIP. (It was coming, all the same.) Being poor helps in this
game, because your own personal bias points in the same direction
technology evolves in.
The advantages of rootlessness are similar to those of poverty.
When you're young you're more mobile—not just because you don't
have a house or much stuff, but also because you're less likely to
have serious relationships. This turns out to be important, because
a lot of startups involve someone moving.
The founders of Kiko, for example, are now en route to the Bay Area
to start their next startup. It's a better place for what they
want to do. And it was easy for them to decide to go, because
neither as far as I know has a serious girlfriend, and everything
they own will fit in one car—or more precisely, will either fit
in one car or is crappy enough that they don't mind leaving it
behind.
They at least were in Boston. What if they'd been in Nebraska,
like Evan Williams was at their age? Someone wrote recently that
the drawback of Y Combinator was that you had to move to participate.
It couldn't be any other way. The kind of conversations we have
with founders, we have to have in person. We fund a dozen startups
at a time, and we can't be in a dozen places at once. But even if
we could somehow magically save people from moving, we wouldn't.
We wouldn't be doing founders a favor by letting them stay in
Nebraska. Places that aren't
startup hubs are toxic to startups.
You can tell that from indirect evidence. You can tell how hard
it must be to start a startup in Houston or Chicago or Miami from
the microscopically small number, per capita, that succeed
there. I don't know exactly what's suppressing all the startups in these
towns—probably a hundred subtle little things—but something
must be.
[2]
Maybe this will change. Maybe the increasing cheapness of startups
will mean they'll be able to survive anywhere, instead of only in
the most hospitable environments. Maybe 37signals is the pattern
for the future. But maybe not. Historically there have always
been certain towns that were centers for certain industries, and
if you weren't in one of them you were at a disadvantage. So my
guess is that 37signals is an anomaly. We're looking at a pattern
much older than "Web 2.0" here.
Perhaps the reason more startups per capita happen in the Bay Area
than Miami is simply that there are more founder-type people there.
Successful startups are almost never started by one person. Usually
they begin with a conversation in which someone mentions that
something would be a good idea for a company, and his friend says,
"Yeah, that is a good idea, let's try it." If you're missing that
second person who says "let's try it," the startup never happens.
And that is another area where undergrads have an edge. They're
surrounded by people willing to say that. At a good college you're
concentrated together with a lot of other ambitious and technically
minded people—probably more concentrated than you'll ever be
again. If your nucleus spits out a neutron, there's a good chance
it will hit another nucleus.
The number one question people ask us at Y Combinator is: Where can
I find a co-founder? That's the biggest problem for someone starting
a startup at 30. When they were in school they knew a lot of good
co-founders, but by 30 they've either lost touch with them or these
people are tied down by jobs they don't want to leave.
Viaweb was an anomaly in this respect too. Though we were comparatively
old, we weren't tied down by impressive jobs. I was trying to be
an artist, which is not very constraining, and Robert, though 29,
was still in grad school due to a little interruption in his academic
career back in 1988. So arguably the Worm made Viaweb possible.
Otherwise Robert would have been a junior professor at that age,
and he wouldn't have had time to work on crazy speculative projects
with me.
Most of the questions people ask Y Combinator we have some kind of
answer for, but not the co-founder question. There is no good
answer. Co-founders really should be people you already know. And
by far the best place to meet them is school. You have a large
sample of smart people; you get to compare how they all perform on
identical tasks; and everyone's life is pretty fluid. A lot of
startups grow out of schools for this reason. Google, Yahoo, and
Microsoft, among others, were all founded by people who met in
school. (In Microsoft's case, it was high school.)
Many students feel they should wait and get a little more experience
before they start a company. All other things being equal, they
should. But all other things are not quite as equal as they look.
Most students don't realize how rich they are in the scarcest
ingredient in startups, co-founders. If you wait too long, you may
find that your friends are now involved in some project they don't
want to abandon. The better they are, the more likely this is to
happen.
One way to mitigate this problem might be to actively plan your
startup while you're getting those n years of experience. Sure,
go off and get jobs or go to grad school or whatever, but get
together regularly to scheme, so the idea of starting a startup
stays alive in everyone's brain. I don't know if this works, but
it can't hurt to try.
It would be helpful just to realize what an advantage you have as
students. Some of your classmates are probably going to be successful
startup founders; at a great technical university, that is a near
certainty. So which ones? If I were you I'd look for the people
who are not just smart, but incurable
builders.
Look
for the people who keep starting projects, and finish at least some
of them. That's what we look for. Above all else, above academic
credentials and even the idea you apply with, we look for people
who build things.
The other place co-founders meet is at work. Fewer do than at
school, but there are things you can do to improve the odds. The
most important, obviously, is to work somewhere that has a lot of
smart, young people. Another is to work for a company located in
a startup hub. It will be easier to talk a co-worker into quitting
with you in a place where startups are happening all around you.
You might also want to look at the employment agreement you sign
when you get hired. Most will say that any ideas you think of while
you're employed by the company belong to them. In practice it's
hard for anyone to prove what ideas you had when, so the line gets
drawn at code. If you're going to start a startup, don't write any
of the code while you're still employed. Or at least discard any
code you wrote while still employed and start over. It's not so
much that your employer will find out and sue you. It won't come
to that; investors or acquirers or (if you're so lucky) underwriters
will nail you first. Between t = 0 and when you buy that yacht,
someone is going to ask if any of your code legally belongs
to anyone else, and you need to be able to say no.
[3]
The most overreaching employee agreement I've seen so far is Amazon's.
In addition to the usual clauses about owning your ideas, you also
can't be a founder of a startup that has another founder who worked
at Amazon—even if you didn't know them or even work there at the
same time. I suspect they'd have a hard time enforcing this, but
it's a bad sign they even try. There are plenty of other places
to work; you may as well choose one that keeps more of your options
open.
Speaking of cool places to work, there is of course Google. But I
notice something slightly frightening about Google: zero startups
come out of there. In that respect it's a black hole. People seem
to like working at Google too much to leave. So if you hope to start
a startup one day, the evidence so far suggests you shouldn't work
there.
I realize this seems odd advice. If they make your life so good
that you don't want to leave, why not work there? Because, in
effect, you're probably getting a local maximum. You need a certain
activation energy to start a startup. So an employer who's fairly
pleasant to work for can lull you into staying indefinitely, even
if it would be a net win for you to leave.
[4]
The best place to work, if you want to start a startup, is probably
a startup. In addition to being the right sort of experience, one
way or another it will be over quickly. You'll either end up rich,
in which case problem solved, or the startup will get bought, in
which case it it will start to suck to work there and it will be
easy to leave, or most likely, the thing will blow up and you'll
be free again.
Your final advantage, ignorance, may not sound very useful. I
deliberately used a controversial word for it; you might equally
call it innocence. But it seems to be a powerful force. My Y
Combinator co-founder Jessica Livingston is just about to publish
a book of interviews
with startup founders, and I noticed a remarkable pattern in them.
One after another said that if they'd known how hard it would be,
they would have been too intimidated to start.
Ignorance can be useful when it's a counterweight to other forms
of stupidity. It's useful in starting startups because you're
capable of more than you realize. Starting startups is harder than
you expect, but you're also capable of more than you expect, so
they balance out.
Most people look at a company like Apple and think, how could I
ever make such a thing? Apple is an institution, and I'm just a
person. But every institution was at one point just a handful of
people in a room deciding to start something. Institutions are
made up, and made up by people no different from you.
I'm not saying everyone could start a startup. I'm sure most people
couldn't; I don't know much about the population at large. When
you get to groups I know well, like hackers, I can say more precisely.
At the top schools, I'd guess as many as a quarter of the CS majors
could make it as startup founders if they wanted.
That "if they wanted" is an important qualification—so important
that it's almost cheating to append it like that—because once you
get over a certain threshold of intelligence, which most CS majors
at top schools are past, the deciding factor in whether you succeed
as a founder is how much you want to. You don't have to be that
smart. If you're not a genius, just start a startup in some unsexy
field where you'll have less competition, like software for human
resources departments. I picked that example at random, but I feel
safe in predicting that whatever they have now, it wouldn't take
genius to do better. There are a lot of people out there working
on boring stuff who are desperately in need of better software, so
however short you think you fall of Larry and Sergey, you can ratchet
down the coolness of the idea far enough to compensate.
As well as preventing you from being intimidated, ignorance can
sometimes help you discover new ideas. Steve Wozniak
put this very strongly:
All the best things that I did at Apple came from (a) not having money and (b) not having done it before, ever. Every single thing that we came out with that was really great, I'd never once done that thing in my life.When you know nothing, you have to reinvent stuff for yourself, and if you're smart your reinventions may be better than what preceded them. This is especially true in fields where the rules change. All our ideas about software were developed in a time when processors were slow, and memories and disks were tiny. Who knows what obsolete assumptions are embedded in the conventional wisdom? And the way these assumptions are going to get fixed is not by explicitly deallocating them, but by something more akin to garbage collection. Someone ignorant but smart will come along and reinvent everything, and in the process simply fail to reproduce certain existing ideas.