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Wednesday, March 23, 2005

Paul Graham On Startups

Paul Graham, author of the book Hackers & Painters gave a talk recenetly at the Harvard Computer Society about building Startups. Excerpts with edits:

- 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. Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.all three are doable. Hard, but doable. And since a startup that succeeds ordinarily makes its founders rich, that implies getting rich is doable too. Hard, but doable.

- You don't need a brilliant idea to start a startup around. The way a startup makes money is to offer people better technology than they have now. But what people have now is often so bad that it doesn't take brilliance to do better. Google's plan, for example, was simply to create a search site that didn't suck. They had three new ideas: index more of the Web, use links to rank search results, and have clean, simple web pages with unintrusive keyword-based ads.

- An idea for a startup, however, is only a beginning. A lot of would-be startup founders think the key to the whole process is the initial idea, and from that point all you have to do is execute. 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.

- It's no coincidence that startups start around universities, because that's where smart people meet. It's not what people learn in classes at MIT and Stanford that has made technology companies spring up around them. If you start a startup, there's a good chance it will be with people you know from college or grad school.

- If you work your way down the Forbes 400 making an x next to the name of each person with an MBA, you'll learn something important about business school. You don't even hit an MBA till number 22, Phil Knight, the CEO of Nike. There are only four 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. The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggests you'd do better to learn how to hack than get an MBA. There is one reason you might want to include business people in a startup, though: because you have to have at least one person willing and able to focus on what customers want. Some believe only business people can do this- that hackers can implement software, but not design it.There's nothing about knowing how to program that prevents hackers from understanding users, or about not knowing how to program that magically enables business people to understand them.

-The difficulty faced in a startup would not be more than you'd endure in an ordinary working life. It's probably less, in fact; it just seems like a lot because it's compressed into a short period. So mainly what a startup buys you is time. That's the way to think about it if you're trying to decide whether to start one. If you're the sort of person who would like to solve the money problem once and for all instead of working for a salary for 40 years, then a startup makes sense.

- Starting a startup is not the great mystery it seems from outside. It's not something you have to know about "business" to do. Build something users love, and spend less than you make. How hard is that?

Category : Startups.
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