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October 2006

In the Q & A peri od after a recent tal k, someone asked what made startups
fai l . After standi ng there gapi ng for a few seconds I real i zed thi s was ki nd of
a tri ck questi on. It' s equi val ent to aski ng how to make a startup succeedi f
you avoi d every cause of fai l ure, you succeedand that' s too bi g a questi on
to answer on the fl y.

Afterwards I real i zed i t coul d be hel pful to l ook at the probl em from thi s
di recti on. If you have a l i st of al l the thi ngs you shoul dn' t do, you can turn
that i nto a reci pe for succeedi ng just by negati ng. And thi s form of l i st may
be more useful i n practi ce. It' s easi er to catch yoursel f doi ng somethi ng you
shoul dn' t than al ways to remember to do somethi ng you shoul d. [1]

In a sense there' s j ust one mi stake that ki l l s startups: not maki ng somethi ng
users want. If you make somethi ng users want, you' l l probabl y be fi ne,
whatever el se you do or don' t do. And i f you don' t make somethi ng users
want, then you' re dead, whatever el se you do or don' t do. So real l y thi s i s a
l i st of 18 thi ngs that cause startups not to make somethi ng users want.
Nearl y al l fai l ure funnel s through that.

1. Si ngl e Founder

Have you ever noti ced how few successful startups were founded by just one
person? Even compani es you thi nk of as havi ng one founder, l i ke Oracl e,
usual l y turn out to have more. It seems unl i kel y thi s i s a coi nci dence.

What' s wrong wi th havi ng one founder? To start wi th, i t' s a vote of no
confi dence. It probabl y means the founder coul dn' t tal k any of hi s fri ends
i nto starti ng the company wi th hi m. That' s pretty al armi ng, because hi s
fri ends are the ones who know hi m best.

But even i f the founder' s fri ends were al l wrong and the company i s a good
bet, he' s sti l l at a di sadvantage. Starti ng a startup i s too hard for one
person. Even i f you coul d do al l the work yoursel f, you need col l eagues to
brai nstorm wi th, to tal k you out of stupi d deci si ons, and to cheer you up
when thi ngs go wrong.

The l ast one mi ght be the most i mportant. The l ow poi nts i n a startup are so
l ow that few coul d bear them al one. When you have mul ti pl e founders, espri t
de corps bi nds them together i n a way that seems to vi ol ate conservati on
l aws. Each thi nks "I can' t l et my fri ends down." Thi s i s one of the most
powerful forces i n human nature, and i t' s mi ssi ng when there' s just one
founder.

2. Bad Location

Startups prosper i n some pl aces and not others. Si l i con Val l ey domi nates,
then Boston, then Seattl e, Austi n, Denver, and New York. After that there' s
not much. Even i n New York the number of startups per capi ta i s probabl y a
20th of what i t i s i n Si l i con Val l ey. In towns l i ke Houston and Chi cago and
Detroi t i t' s too smal l to measure.

Why i s the fal l off so sharp? Probabl y for the same reason i t i s i n other
i ndustri es. What' s the si xth l argest fashi on center i n the US? The si xth
l argest center for oi l , or fi nance, or publ i shi ng? Whatever they are they' re
probabl y so far from the top that i t woul d be mi sl eadi ng even to cal l them
centers.

It' s an i nteresti ng questi on why ci ti es become startup hubs, but the reason
startups prosper i n them i s probabl y the same as i t i s for any i ndustry:
that' s where the experts are. Standards are hi gher; peopl e are more
sympatheti c to what you' re doi ng; the ki nd of peopl e you want to hi re want
to l i ve there; supporti ng i ndustri es are there; the peopl e you run i nto i n
chance meeti ngs are i n the same busi ness. Who knows exactl y how these
factors combi ne to boost startups i n Si l i con Val l ey and squi sh them i n Detroi t,
but i t' s cl ear they do from the number of startups per capi ta i n each.

3. Margi nal Ni che

Most of the groups that appl y to Y Combi nator suffer from a common
probl em: choosi ng a smal l , obscure ni che i n the hope of avoi di ng competi ti on.

If you watch l i ttl e ki ds pl ayi ng sports, you noti ce that bel ow a certai n age
they' re afrai d of the bal l . When the bal l comes near them thei r i nsti nct i s to
avoi d i t. I di dn' t make a l ot of catches as an ei ght year ol d outfi el der,
because whenever a fl y bal l came my way, I used to cl ose my eyes and hol d
my gl ove up more for protecti on than i n the hope of catchi ng i t.

Choosi ng a margi nal proj ect i s the startup equi val ent of my ei ght year ol d
strategy for deal i ng wi th fl y bal l s. If you make anythi ng good, you' re goi ng
to have competi tors, so you may as wel l face that. You can onl y avoi d
competi ti on by avoi di ng good i deas.

I thi nk thi s shri nki ng from bi g probl ems i s mostl y unconsci ous. It' s not that
peopl e thi nk of grand i deas but deci de to pursue smal l er ones because they
seem safer. Your unconsci ous won' t even l et you thi nk of grand i deas. So the
sol uti on may be to thi nk about i deas wi thout i nvol vi ng yoursel f. What woul d
be a great i dea for someone el se to do as a startup?

4. Derivati ve Idea

Many of the appl i cati ons we get are i mi tati ons of some exi sti ng company.
That' s one source of i deas, but not the best. If you l ook at the ori gi ns of
successful startups, few were started i n i mi tati on of some other startup.
Where di d they get thei r i deas? Usual l y from some speci fi c, unsol ved
probl em the founders i denti fi ed.

Our startup made software for maki ng onl i ne stores. When we started i t,
there wasn' t any; the few si tes you coul d order from were hand-made at
great expense by web consul tants. We knew that i f onl i ne shoppi ng ever took
off, these si tes woul d have to be generated by software, so we wrote some.
Pretty strai ghtforward.

It seems l i ke the best probl ems to sol ve are ones that affect you personal l y.
Appl e happened because Steve Wozni ak wanted a computer, Googl e because
Larry and Sergey coul dn' t fi nd stuff onl i ne, Hotmai l because Sabeer Bhati a
and Jack Smi th coul dn' t exchange emai l at work.

So i nstead of copyi ng the Facebook, wi th some vari ati on that the Facebook
ri ghtl y i gnored, l ook for i deas from the other di recti on. Instead of starti ng
from compani es and worki ng back to the probl ems they sol ved, l ook for
probl ems and i magi ne the company that mi ght sol ve them. [2] What do
peopl e compl ai n about? What do you wi sh there was?

5. Obstinacy

In some fi el ds the way to succeed i s to have a vi si on of what you want to
achi eve, and to hol d true to i t no matter what setbacks you encounter.
Starti ng startups i s not one of them. The sti ck-to-your-vi si on approach
works for somethi ng l i ke wi nni ng an Ol ympi c gol d medal , where the probl em
i s wel l -defi ned. Startups are more l i ke sci ence, where you need to fol l ow the
trai l wherever i t l eads.

So don' t get too attached to your ori gi nal pl an, because i t' s probabl y wrong.
Most successful startups end up doi ng somethi ng di fferent than they
ori gi nal l y i ntendedoften so di fferent that i t doesn' t even seem l i ke the
same company. You have to be prepared to see the bet ter i dea when i t
arri ves. And the hardest part of that i s often di scardi ng your ol d i dea.

But openness to new i deas has to be tuned just ri ght. Swi tchi ng to a new
i dea every week wi l l be equal l y fatal . Is there some ki nd of external test you
can use? One i s to ask whether the i deas represent some ki nd of progressi on.
If i n each new i dea you' re abl e to re-use most of what you bui l t for the
previ ous ones, then you' re probabl y i n a process that converges. Whereas i f
you keep restarti ng from scratch, that' s a bad si gn.

Fortunatel y there' s someone you can ask for advi ce: your users. If you' re
thi nki ng about turni ng i n some new di recti on and your users seem exci ted
about i t, i t' s probabl y a good bet.

6. Hi ri ng Bad Programmers

I forgot to i ncl ude thi s i n the earl y versi ons of the l i st, because nearl y al l
the founders I know are programmers. Thi s i s not a seri ous probl em for them.
They mi ght acci dental l y hi re someone bad, but i t' s not goi ng to ki l l the
company. In a pi nch they can do whatever' s requi red themsel ves.

But when I thi nk about what ki l l ed most of the startups i n the e-commerce
busi ness back i n the 90s, i t was bad programmers. A l ot of those compani es
were started by busi ness guys who thought the way startups worked was
that you had some cl ever i dea and then hi red programmers to i mpl ement i t.
That' s actual l y much harder than i t soundsal most i mpossi bl y hard i n fact
because busi ness guys can' t tel l whi ch are the good programmers. They
don' t even get a shot at the best ones, because no one real l y good want s a
job i mpl ementi ng the vi si on of a busi ness guy.

In practi ce what happens i s that the busi ness guys choose peopl e they thi nk
are good programmers (i t says here on hi s resume that he' s a Mi crosoft
Certi fi ed Devel oper) but who aren' t. Then they' re mysti fi ed to fi nd that thei r
startup l umbers al ong l i ke a Worl d War II bomber whi l e thei r competi tors
scream past l i ke j et fi ghters. Thi s ki nd of startup i s i n the same posi ti on as a
bi g company, but wi thout the advantages.

So how do you pi ck good programmers i f you' re not a programmer? I don' t
thi nk there' s an answer. I was about to say you' d have to fi nd a good
programmer to hel p you hi re peopl e. But i f you can' t recogni ze good
programmers, how woul d you even do that?

7. Choosi ng the Wrong Pl atform

A rel ated probl em (si nce i t tends to be done by bad programmers) i s
choosi ng the wrong pl atform. For exampl e, I thi nk a l ot of startups duri ng
the Bubbl e ki l l ed themsel ves by deci di ng to bui l d server -based appl i cati ons
on Wi ndows. Hotmai l was sti l l runni ng on FreeBSD for years after Mi crosoft
bought i t, presumabl y because Wi ndows coul dn' t handl e the l oad. If
Hotmai l ' s founders had chosen to use Wi ndows, they woul d have been
swamped.

PayPal onl y just dodged thi s bul l et. After they merged wi th X.com, the new
CEO wanted to swi tch to Wi ndowseven after PayPal cofounder Max Levchi n
showed that thei r software scal ed onl y 1% as wel l on Wi ndows as Uni x.
Fortunatel y for PayPal they swi tched CEOs i nstead.

Pl atform i s a vague word. It coul d mean an operati ng system, or a
programmi ng l anguage, or a "framework" bui l t on top of a programmi ng
l anguage. It i mpl i es somethi ng that both supports and l i mi ts, l i ke the
foundati on of a house.

The scary thi ng about pl atforms i s that there are al ways some that seem to
outsi ders to be fi ne, responsi bl e choi ces and yet, l i ke Wi ndows i n the 90s,
wi l l destroy you i f you choose them. Java appl ets were probabl y the most
spectacul ar exampl e. Thi s was supposed to be the new way of del i veri ng
appl i cati ons. Presumabl y i t ki l l ed just about 100% of the startups who
bel i eved that.

How do you pi ck the ri ght pl atforms? The usual way i s to hi re good
programmers and l et them choose. But there i s a tri ck you coul d use i f
you' re not a programmer: vi si t a top computer sci ence department and see
what they use i n research proj ects.

8. Sl owness i n Launching

Compani es of al l si zes have a hard ti me getti ng software done. It' s i ntri nsi c
to the medi um; software i s al ways 85% done. It takes an effort of wi l l to
push through thi s and get somethi ng rel eased to users. [3]

Startups make al l ki nds of excuses for del ayi ng thei r l aunch. Most are
equi val ent to the ones peopl e use for procrasti nati ng i n everyday l i fe.
There' s somethi ng that needs to happen fi rst. Maybe. But i f the software
were 100% fi ni shed and ready to l aunch at the push of a button, woul d they
sti l l be wai ti ng?

One reason to l aunch qui ckl y i s that i t forces you to actual l y fi ni sh some
quantum of work. Nothi ng i s trul y fi ni shed ti l l i t' s rel eased; you can see that
from the rush of work that' s al ways i nvol ved i n rel easi ng anythi ng, no matter
how fi ni shed you thought i t was. The other reason you need to l aunch i s that
i t' s onl y by bounci ng your i dea off users that you ful l y understand i t.

Several di sti nct probl ems mani fest themsel ves as del ays i n l aunchi ng:
worki ng too sl owl y; not trul y understandi ng the probl em; fear of havi ng to
deal wi th users; fear of bei ng judged; worki ng on too many di fferent thi ngs;
excessi ve perfecti oni sm. Fortunatel y you can combat al l of them by the
si mpl e expedi ent of forci ng yoursel f to l aunch somethi ng fai rl y qui ckl y.

9. Launching Too Early

Launchi ng too sl owl y has probabl y ki l l ed a hundred ti mes more startups than
l aunchi ng too fast, but i t i s possi bl e to l aunch too fast. The danger here i s
that you rui n your reputati on. You l aunch somethi ng, the earl y adopters try
i t out, and i f i t' s no good they may never come back.

So what' s the mi ni mum you need to l aunch? We suggest startups thi nk about
what they pl an to do, i denti fy a core that' s both (a) useful on i ts own and (b)
somethi ng that can be i ncremental l y expanded i nto the whol e proj ect, and
then get that done as soon as possi bl e.

Thi s i s the same approach I (and many other programmers) use for wri ti ng
software. Thi nk about the overal l goal , then start by wri ti ng the smal l est
subset of i t that does anythi ng useful . If i t' s a subset, you' l l have to wri te i t
anyway, so i n the worst case you won' t be wasti ng your ti me. But more l i kel y
you' l l fi nd that i mpl ementi ng a worki ng subset i s both good for moral e and
hel ps you see more cl earl y what the rest shoul d do.

The earl y adopters you need to i mpress are fai rl y tol erant. They don' t expect
a newl y l aunched product to do everythi ng; i t just has to do somethi ng.

10. Havi ng No Speci fic User in Mi nd

You can' t bui l d thi ngs users l i ke wi thout understandi ng them. I menti oned
earl i er that the most successful startups seem to have begun by tryi ng to
sol ve a probl em thei r founders had. Perhaps there' s a rul e here: perhaps you
create weal th i n proporti on to how wel l you understand the probl em you' re
sol vi ng, and the probl ems you understand best are your own. [4]

That' s j ust a theory. What' s not a theory i s the converse: i f you' re tryi ng to
sol ve probl ems you don' t understand, you' re hosed.

And yet a surpri si ng number of founders seem wi l l i ng to assume that
someone, they' re not sure exactl y who, wi l l want what they' re bui l di ng. Do
the founders want i t? No, they' re not the target market. Who i s? Teenagers.
Peopl e i nterested i n l ocal events (that one i s a perenni al tarpi t). Or
"busi ness" users. What busi ness users? Gas stati ons? Movi e studi os? Defense
contractors?

You can of course bui l d somethi ng for users other than yoursel f. We di d. But
you shoul d real i ze you' re steppi ng i nto dangerous terri tory. You' re fl yi ng on
i nstruments, i n effect, so you shoul d (a) consci ousl y shi ft gears, i nstead of
assumi ng you can rel y on your i ntui ti ons as you ordi nari l y woul d, and (b)
l ook at the i nstruments.

In thi s case the i nstruments are the users. When desi gni ng for other peopl e
you have to be empi ri cal . You can no l onger guess what wi l l work; you have
to fi nd users and measure thei r responses. So i f you' re goi ng to make
somethi ng for teenagers or "busi ness" users or some other group that
doesn' t i ncl ude you, you have to be abl e to tal k some speci fi c ones i nto
usi ng what you' re maki ng. If you can' t, you' re on the wrong track.

11. Rai si ng Too Li ttl e Money

Most successful st artups take fundi ng at some poi nt. Li ke havi ng more than
one founder, i t seems a good bet stati sti cal l y. How much shoul d you take,
though?

Startup fundi ng i s measured i n ti me. Every startup that i sn' t profi tabl e
(meani ng nearl y al l of them, i ni ti al l y) has a certai n amount of ti me l eft
before the money runs out and they have to stop. Thi s i s someti mes referred
to as runway, as i n "How much runway do you have l eft?" It' s a good
metaphor because i t remi nds you that when the money runs out you' re goi ng
to be ai rborne or dead.

Too l i ttl e money means not enough to get ai rborne. What ai rborne means
depends on the si tuati on. Usual l y you have to advance to a vi si bl y hi gher
l evel : i f al l you have i s an i dea, a worki ng prototype; i f you have a prototype,
l aunchi ng; i f you' re l aunched, si gni fi cant growth. It depends on i nvestors,
because unti l you' re profi tabl e that' s who you have to convi nce.

So i f you take money from i nvestors, you have to take enough to get to the
next step, whatever that i s. [5] Fortunatel y you have some control over both
how much you spend and what the next step i s. We advi se startups to set
both l ow, i ni ti al l y: spend practi cal l y nothi ng, and make your i ni ti al goal
si mpl y to bui l d a sol i d prototype. Thi s gi ves you maxi mum fl exi bi l i ty.

12. Spendi ng Too Much

It' s hard to di sti ngui sh spendi ng too much from rai si ng too l i ttl e. If you run
out of money, you coul d say ei ther was the cause. The onl y way to deci de
whi ch to cal l i t i s by compari son wi th other startups. If you rai sed fi ve
mi l l i on and ran out of money, you probabl y spent too much.

Burni ng through too much money i s not as common as i t used to be.
Founders seem to have l earned that l esson. Pl us i t keeps getti ng cheaper to
start a startup. So as of thi s wri ti ng few startups spend too much. None of
the ones we' ve funded have. (And not j ust because we make smal l
i nvestments; many have gone on to rai se further rounds.)

The cl assi c way to burn through cash i s by hi ri ng a l ot of peopl e. Thi s bi tes
you twi ce: i n addi ti on to i ncreasi ng your costs, i t sl ows you downso money
that' s getti ng consumed faster has to l ast l onger. Most hackers understand
why that happens; Fred Brooks expl ai ned i t i n The Mythi cal Man-Month.

We have three general suggesti ons about hi ri ng: (a) don' t do i t i f you can
avoi d i t, (b) pay peopl e wi th equi ty rather than sal ary, not just to save
money, but because you want the ki nd of peopl e who are commi tted enough
to prefer that, and (c) onl y hi re peopl e who are ei ther goi ng to wri te code or
go out and get users, because those are the onl y thi ngs you need at fi rst.

13. Rai si ng Too Much Money

It' s obvi ous how too l i ttl e money coul d ki l l you, but i s there such a thi ng as
havi ng too much?

Yes and no. The probl em i s not so much the money i tsel f as what comes wi th
i t. As one VC who spoke at Y Combi nator sai d, "Once you take several mi l l i on
dol l ars of my money, the cl ock i s ti cki ng." If VCs fund you, they' re not goi ng
to l et you just put the money i n the bank and keep operati ng as two guys
l i vi ng on ramen. They want that money to go to work. [6] At the very l east
you' l l move i nto proper offi ce space and hi re more peopl e. That wi l l change
the atmosphere, and not enti rel y for the better. Now most of your peopl e wi l l
be empl oyees rather than founders. They won' t be as commi tted; they' l l
need to be tol d what to do; they' l l start to engage i n offi ce pol i ti cs.

When you rai se a l ot of money, your company moves to the suburbs and has
ki ds.

Perhaps more dangerousl y, once you take a l ot of money i t gets harder to
change di recti on. Suppose your i ni ti al pl an was to sel l somethi ng to
compani es. After taki ng VC money you hi re a sal es force to do that. What
happens now i f you real i ze you shoul d be maki ng thi s for consumers i nstead
of busi nesses? That' s a compl etel y di fferent ki nd of sel l i ng. What happens, i n
practi ce, i s that you don' t real i ze that. The more peopl e you have, the more
you stay poi nted i n the same di recti on.

Another drawback of l arge i nvestments i s the ti me they take. The ti me
requi red to rai se money grows wi th the amount. [7] When the amount ri ses
i nto the mi l l i ons, i nvestors get very cauti ous. VCs never qui te say yes or no;
they just engage you i n an apparentl y endl ess conversati on. Rai si ng VC scal e
i nvestments i s thus a huge ti me si nkmore work, probabl y, than the startup
i tsel f. And you don' t want to be spendi ng al l your ti me tal ki ng to i nvestors
whi l e your competi tors are spendi ng thei rs bui l di ng thi ngs.

We advi se founders who go on to seek VC money to take the fi rst reasonabl e
deal they get. If you get an offer from a reputabl e fi rm at a reasonabl e
val uati on wi th no unusual l y onerous terms, just take i t and get on wi th
bui l di ng the company. [8] Who cares i f you coul d get a 30% better deal
el sewhere? Economi cal l y, startups are an al l -or-nothi ng game. Bargai n-
hunti ng among i nvestors i s a waste of ti me.

14. Poor Investor Management

As a founder, you have to manage your i nvestors. You shoul dn' t i gnore them,
because they may have useful i nsi ghts. But nei ther shoul d you l et them run
the company. That' s supposed to be your job. If i nvestors had suffi ci ent
vi si on to run the compani es they fund, why di dn' t they start them?

Pi ssi ng off i nvestors by i gnori ng them i s probabl y l ess dangerous than cavi ng
i n to them. In our startup, we erred on the i gnori ng si de. A l ot of our energy
got drai ned away i n di sputes wi th i nvestors i nstead of goi ng i nto the product.
But thi s was l ess costl y than gi vi ng i n, whi ch woul d probabl y have destroyed
the company. If the founders know what they' re doi ng, i t' s better to have
hal f thei r attenti on focused on the product than the ful l attenti on of
i nvestors who don' t.

How hard you have to work on managi ng i nvestors usual l y depends on how
much money you' ve taken. When you rai se VC-scal e money, the i nvestors
get a great deal of control . If they have a board maj ori ty, they' re l i teral l y
your bosses. In the more common case, where founders and i nvestors are
equal l y represented and the deci di ng vote i s cast by neutral outsi de di rectors,
al l the i nvestors have to do i s convi nce the outsi de di rect ors and they
control the company.

If thi ngs go wel l , thi s shoul dn' t matter. So l ong as you seem to be advanci ng
rapi dl y, most i nvestors wi l l l eave you al one. But thi ngs don' t al ways go
smoothl y i n startups. Investors have made troubl e even for the most
successful compani es. One of the most famous exampl es i s Appl e, whose
board made a nearl y fatal bl under i n fi ri ng Steve Jobs. Apparentl y even
Googl e got a l ot of gri ef from thei r i nvestors earl y on.

15. Sacrifi ci ng Users to (Supposed) Profit

When I sai d at the begi nni ng that i f you make somethi ng users want, you' l l
be fi ne, you may have noti ced I di dn' t menti on anythi ng about havi ng the
ri ght busi ness model . That' s not because maki ng money i s uni mportant. I' m
not suggesti ng that founders start compani es wi t h no chance of maki ng
money i n the hope of unl oadi ng them before they tank. The reason we tel l
founders not to worry about the busi ness model i ni ti al l y i s that maki ng
somethi ng peopl e want i s so much harder.

I don' t know why i t' s so hard to make somethi ng peopl e want. It seems l i ke
i t shoul d be strai ghtforward. But you can tel l i t must be hard by how few
startups do i t.

Because maki ng somethi ng peopl e want i s so much harder than maki ng
money from i t, you shoul d l eave busi ness model s for l ater, just as you' d
l eave some tri vi al but messy feature for versi on 2. In versi on 1, sol ve the
core probl em. And the core probl em i n a startup i s how to create weal th (=
how much peopl e want somethi ng x the number who want i t), not how to
convert that weal th i nto money.

The compani es that wi n are the ones that put users fi rst. Googl e, for
exampl e. They made search work, then worri ed about how to make money
from i t. And yet some startup founders sti l l thi nk i t' s i rresponsi bl e not to
focus on the busi ness model from the begi nni ng. They' re often encouraged i n
thi s by i nvestors whose experi ence comes from l ess mal l eabl e i ndustri es.

It i s i rresponsi bl e not to thi nk about busi ness model s. It' s j ust ten ti mes
more i rresponsi bl e not to thi nk about the product.

16. Not Wanti ng to Get Your Hands Di rty

Nearl y al l programmers woul d rather spend thei r ti me wri ti ng code and have
someone el se handl e the messy busi ness of extracti ng money from i t. And
not just the l azy ones. Larry and Sergey apparentl y fel t thi s way too at fi rst.
After devel opi ng thei r new search al gori thm, the fi rst thi ng they tri ed was to
get some other company to buy i t.

Start a company? Yech. Most hackers woul d rather just have i deas. But as
Larry and Sergey found, there' s not much of a market for i deas. No one
trusts an i dea ti l l you embody i t i n a product and use that to grow a user
base. Then they' l l pay bi g ti me.

Maybe thi s wi l l change, but I doubt i t wi l l change much. There' s nothi ng l i ke
users for convi nci ng acqui rers. It' s not j ust that the ri sk i s decreased. The
acqui rers are human, and they have a hard ti me payi ng a bunch of young
guys mi l l i ons of dol l ars just for bei ng cl ever. When the i dea i s embodi ed i n a
company wi th a l ot of users, they can tel l themsel ves they' re buyi ng the
users rather than the cl everness, and thi s i s easi er for them to swal l ow. [9]

If you' re goi ng to attract users, you' l l probabl y have to get up from your
computer and go fi nd some. It' s unpl easant work, but i f you can make
yoursel f do i t you have a much greater chance of succeedi ng. In the fi rst
batch of startups we funded, i n the summer of 2005, most of the founders
spent al l thei r ti me bui l di ng thei r appl i cat i ons. But there was one who was
away hal f the ti me tal ki ng to executi ves at cel l phone compani es, tryi ng to
arrange deal s. Can you i magi ne anythi ng more pai nful for a hacker? [10] But
i t pai d off, because thi s startup seems the most successful of that group by
an order of magni tude.

If you want to start a startup, you have to face the fact that you can' t just
hack. At l east one hacker wi l l have to spend some of the ti me doi ng busi ness
stuff.

17. Fights Between Founders

Fi ghts between founders are surpri si ngl y common. About 20% of the startups
we' ve funded have had a founder l eave. It happens so often that we' ve
reversed our atti tude to vesti ng. We sti l l don' t requi re i t, but now we advi se
founders to vest so there wi l l be an orderl y way for peopl e to qui t.

A founder l eavi ng doesn' t necessari l y ki l l a startup, though. Pl enty of
successful startups have had that happen. [11] Fortunatel y i t' s usual l y the
l east commi tted founder who l eaves. If there are three founders and one who
was l ukewarm l eaves, bi g deal . If you have two and one l eaves, or a guy
wi th cri ti cal techni cal ski l l s l eaves, that' s more of a probl em. But even that
i s survi vabl e. Bl ogger got down to one person, and they bounced back.

Most of the di sputes I' ve seen between founders coul d have been avoi ded i f
they' d been more careful about who they started a company wi th. Most
di sputes are not due to t he si tuati on but the peopl e. Whi ch means they' re
i nevi tabl e. And most founders who' ve been burned by such di sputes probabl y
had mi sgi vi ngs, whi ch they suppressed, when they started the company.
Don' t suppress mi sgi vi ngs. It' s much easi er to fi x probl ems before the
company i s started than after. So don' t i ncl ude your housemate i n your
startup because he' d feel l eft out otherwi se. Don' t start a company wi th
someone you di sl i ke because they have some ski l l you need and you worry
you won' t fi nd anyone el se. The peopl e are the most i mportant i ngredi ent i n
a startup, so don' t compromi se there.

18. A Hal f-Hearted Effort

The fai l ed startups you hear most about are the spectactul ar fl ameouts.
Those are actual l y the el i te of fai l ures. The most common type i s not the one
that makes spectacul ar mi stakes, but the one that doesn' t do much of
anythi ngthe one we never even hear about, because i t was some proj ect a
coupl e guys started on the si de whi l e worki ng on thei r day jobs, but whi ch
never got anywhere and was gradual l y abandoned.

Stati sti cal l y, i f you want to avoi d fai l ure, i t woul d seem l i ke the most
i mportant thi ng i s to qui t your day j ob. Most founders of fai l ed startups don' t
qui t thei r day j obs, and most founders of successful ones do. If startup
fai l ure were a di sease, the CDC woul d be i ssui ng bul l eti ns warni ng peopl e to
avoi d day j obs.

Does that mean you shoul d qui t your day j ob? Not necessari l y. I' m guessi ng
here, but I' d guess that many of these woul d-be founders may not have the
ki nd of determi nati on i t takes to start a company, and that i n the back of
thei r mi nds, they know i t. The reason they don' t i nvest more ti me i n thei r
startup i s that they know i t' s a bad i nvestment. [12]

I' d al so guess there' s some band of peopl e who coul d have succeeded i f
they' d taken the l eap and done i t ful l -ti me, but di dn' t. I have no i dea how
wi de thi s band i s, but i f the wi nner/borderl i ne/hopel ess progressi on has the
sort of di stri buti on you' d expect, the number of peopl e who coul d have made
i t, i f they' d qui t thei r day j ob, i s probabl y an order of magni tude l arger than
the number who do make i t. [13]

If that' s true, most startups that coul d succeed fai l because the founders
don' t devote thei r whol e efforts to them. That certai nl y accords wi th what I
see out i n the worl d. Most startups fai l because they don' t make somethi ng
peopl e want, and the reason most don' t i s that they don' t try hard enough.

In other words, starti ng startups i s just l i ke everythi ng el se. The bi ggest
mi stake you can make i s not to try hard enough. To the extent there' s a
secret to success, i t' s not to be i n deni al about that.



Notes

[1] Thi s i s not a compl ete l i st of the causes of fai l ure, just those you can
control . There are al so several you can' t, notabl y i nepti tude and bad l uck.

[2] Ironi cal l y, one vari ant of the Facebook that mi ght work i s a facebook
excl usi vel y for col l ege students.

[3] Steve Jobs tri ed to moti vate peopl e by sayi ng "Real arti sts shi p." Thi s i s
a fi ne sentence, but unfortunatel y not true. Many famous works of art are
unfi ni shed. It' s true i n fi el ds that have hard deadl i nes, l i ke archi tecture and
fi l mmaki ng, but even there peopl e tend to be tweaki ng stuff ti l l i t' s yanked
out of thei r hands.

[4] There' s probabl y al so a second factor: startup founders tend to be at the
l eadi ng edge of technol ogy, so probl ems they face are probabl y especi al l y
val uabl e.

[5] You shoul d take more than you thi nk you' l l need, maybe 50% to 100%
more, because software takes l onger to wri te and deal s l onger to cl ose than
you expect.

[6] Si nce peopl e someti mes cal l us VCs, I shoul d add that we' re not. VCs
i nvest l arge amounts of other peopl e' s money. We i nvest smal l amounts of
our own, l i ke angel i nvestors.

[7] Not l i nearl y of course, or i t woul d take forever to rai se fi ve mi l l i on
dol l ars. In practi ce i t just feel s l i ke i t takes forever.

Though i f you i ncl ude the cases where VCs don' t i nvest, i t woul d l i teral l y
take forever i n the medi an case. And maybe we shoul d, because the danger
of chasi ng l arge i nvestments i s not just that they take a l ong ti me. That' s
the best case. The real danger i s that you' l l expend a l ot of ti me and get
nothi ng.

[8] Some VCs wi l l offer you an arti fi ci al l y l ow val uati on to see i f you have
the bal l s to ask for more. It' s l ame that VCs pl ay such games, but some do.
If you' re deal i ng wi th one of those you shoul d push back on the val uati on a
bi t.

[9] Suppose YouTube' s founders had gone to Googl e i n 2005 and tol d them
"Googl e Vi deo i s badl y desi gned. Gi ve us $10 mi l l i on and we' l l tel l you al l the
mi stakes you made." They woul d have gotten the royal raspberry. Ei ghteen
months l ater Googl e pai d $1.6 bi l l i on for the same l esson, partl y because
they coul d then tel l themsel ves that they were buyi ng a phenomenon, or a
communi ty, or some vague thi ng l i ke that.

I don' t mean to be hard on Googl e. They di d better than thei r competi tors,
who may have now mi ssed the vi deo boat enti rel y.

[10] Yes, actual l y: deal i ng wi th the government. But phone compani es are
up there.

[11] Many more than most peopl e real i ze, because compani es don' t adverti se
thi s. Di d you know Appl e ori gi nal l y had three founders?

[12] I' m not di ssi ng these peopl e. I don' t have the determi nati on mysel f.
I' ve twi ce come cl ose to starti ng startups si nce Vi aweb, and both ti mes I
bai l ed because I real i zed that wi thout the spur of poverty I j ust wasn' t
wi l l i ng to endure the stress of a startup.

[13] So how do you know whether you' re i n the cat egory of peopl e who
shoul d qui t thei r day j ob, or the presumabl y l arger one who shoul dn' t? I got
to the poi nt of sayi ng that thi s was hard to judge for yoursel f and that you
shoul d seek outsi de advi ce, before real i zi ng that that' s what we do. We thi nk
of oursel ves as i nvestors, but vi ewed from the other di recti on Y Combi nator
i s a servi ce for advi si ng peopl e whether or not to qui t thei r day j ob. We
coul d be mi staken, and no doubt often are, but we do at l east bet money on
our concl usi ons.

Thanks to Sam Al tman, Jessi ca Li vi ngston, Greg McAdoo, and Robert Morri s
for readi ng drafts of thi s.

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