Notes from Paul Graham's essays =============================== > Initial idea doesn't need to be great, but it has to evolve into a great idea. Ideas for fast growing companies are so rare that the best way to find new ones is to discover those recently made viable by change. The majority of startups will be working on something that's never going to go anywhere. > **Growth drives everything in this world.** In technology, companies that grow slowly tend not to grow as big. The company's **growth rate** is the measure of a startup. If you don't know that number, you don't even know if you're doing well or badly. A constant number of new customers every month means you're in trouble, because your growth rate is decreasing. > Measure growth rate per week, but only after you've launched. A good growth rate (during YC) is **5-7% a week**. If you can hit 10% a week you're doing exceptionally well. If you can only manage 1%, it's a sign you haven't yet figured out what you're doing. > Focus on just hitting a growth rate every week. This focus reduces the otherwise bewilderingly multifarious problem of starting a startup to a single problem. **Use that target growth rate to make all your decisions for you**. Having to hit a growth number every week forces founders to act. Nine times out of ten, sitting around **strategizing is just a form of procrastination**. > Best thing to measure growth rate of is **revenue** for startups that charge initially, and **active users** for startups that do not. > Startups early on need frequent feedback from their users to tweak what they're doing. [Do Things that Don't Scale](http://paulgraham.com/ds.html) -------------------------- - Be aggressive when recruiting new users. **Manually and individually recruit your initial users**; go out to a coffee shop and have people try your product. Go door-to-door. Have people sign up for your beta in person. The numbers will seem small at first, but don't be fooled by compound growth - it starts slow. - The question to ask about an early stage startup is not "is this company taking over the world?" but "how big could this company get if the founders did the right things?" And the right things often seem both laborious and inconsequential at the time. - You should take extraordinary measures not just to acquire users, but also to make them happy. Send them handwritten thank you notes. Give them free stuff (e.g. DropBox gives free space). Your first users should feel that signing up with you was one of the best choices they ever made. One advantage of being small: **you can provide a level of service no big company can**. - You can and should give users an insanely great experience with an early, incomplete, buggy product, if you make up the difference with attentiveness. The feedback you get from engaging directly with your earliest users will be the best you ever get. - Sometimes the right unscalable trick is to **focus on a deliberately narrow market**. It's always worth asking if there's a subset of the market in which you can get a critical mass of users quickly. - Like paying excessive attention to early customers, fabricating things yourself turns out to be valuable for hardware startups. You can tweak the design faster when you're the factory, and you learn things you'd never have known otherwise. - Pick a single user and act as if they were consultants building something just for that one user. The initial user serves as the form for your mold; keep tweaking till you fit their needs perfectly, and you'll usually find you've made something other users want too. - Another consulting-like technique for recruiting initially lukewarm users is to is to use your software yourselves on their behalf. They might not want to make and setup an account, so do it for them with their consent. It can teach you how it would feel to merchants to use your software. Sometimes the feedback loop is near instantaneous. - **Some startups could be entirely manual at first.** If you can find someone with a problem that needs solving and you can solve it manually, go ahead and do that for as long as you can, and then gradually automate the bottlenecks. - The Big Launch tactic doesn't work. **Launches matter very little.** - **Partnerships usually don't work either.** They don't work for startups in general, but they especially don't work as a way to get growth started. - Any strategy that omits the effort—whether it's expecting a big launch to get you users, or a big partner—won't work. - TL;DR recruit users manually and give them an overwhelmingly good experience, and founders need to work hard [How to Convince Investors](http://paulgraham.com/convince.html) ========================== - Convince investors with your startup, _not_ your pitch. - Be formidable founders. A formidable person is one who seems like they'll get what they want, regardless of whatever obstacles are in the way. Formidable is close to confident, except that someone could be confident and mistaken. Formidable is roughly justifiably confident. - To seem most formidable as an inexperienced founder is to stick to the truth. Convince yourself that your startup is worth investing in (not that it'll succeed), and then when you explain this to investors they'll believe you. And by convince yourself, I don't mean play mind games with yourself to boost your confidence. I mean truly evaluate whether your startup is worth investing in. If it isn't, don't try to raise money and change what you're doing. - Know everything about your market. To evaluate whether your startup is worth investing in, you have to be a domain expert. If you're not a domain expert, you can be as convinced as you like about your idea, and it will seem to investors no more than an instance of the Dunning-Kruger effect. - The time to raise money is not when you need it, or when you reach some artificial deadline like a Demo Day. It's when you can convince investors, and not before. Work on your startup up until a week before your pitch before switching focus. - Founders think of startups as ideas, but investors think of them as markets. If there are x number of customers who'd pay an average of $y per year for what you're making, then the **total addressable market** (TAM) of your company is $xy. Investors don't expect you to collect all that money, but it's an upper bound on how big you can get. - Your target market has to be big (eventually), and it also has to be capturable by you. - Identify some specific trend you'll benefit from. Usually you can find this by asking "why now?" If this is such a great idea, why hasn't someone else already done it? Ideally the answer is that it only recently became a good idea, because something changed, and no one else has noticed yet. - The best investors rarely care who else is investing, but mediocre investors almost all do. So you can use the question "Who else is investing?" as a test of investor quality. The best solution is to tackle the problem head-on, and to explain why investors have turned you down (make it clear when you ask that you're not trying to dispute their decision—just that if there is some weakness in your plans, you need to know about it) and why they're mistaken. The most common lie is that while no investors have committed yet, several are about to. - Don't use vague, grandiose marketing-speak in your pitch. It not only doesn't work on them, but seems a mark of incompetence. Be clear and concise, use the words that convinced yourself. - **Recipe for impressing investors:** 1. Make something worth investing in. 2. Understand why it's worth investing in. 3. Explain that clearly to investors.