

How to Start a Startup (2005) - ajaimk
http://paulgraham.com/start.html

======
kn0thing
I'll never forget this essay, because he first delivered it as a talk at
Harvard that Steve and I trained up from Virginia to attend. After Steve had
lent me Masters of Doom, I was already convinced we should start a startup
together, but this talk sealed the deal. I know Chris Slowe (later our first
'hire' at reddit) was in the audience that evening and I'm sure a number of
other future YCers were also there with no clue of where it would lead.

Thank you, Paul Graham, for making that comment about finding investment from
rich people who'd done it before (but not him). If I recall, it was feeling
guilty about hearing the dejection in the room that got him thinking about
starting Y Combinator.

And what a difference that decision has made in so many of our lives.

~~~
alnayyir
My coworker and friend danced for Chris yesterday.

I don't know why but I always find anecdotes about how Reddit got started
really fascinating. Perhaps personal interest.

~~~
keysersosa
So here's the back story: we're working on migrating the reddit blog off of
blogger and have a test environment set up that we were playing around with.
We have a semi-private IRC channel that your coworker, as a close friend of
the reddit team and heavy duty open source developer also hangs around in.

I asked if anyone wanted login to the new blog interface to which I got a "Me!
Me!" from the gentleman in question. Since he isn't strictly speaking a member
of the dev team, I did the natural thing and said, "ok, but in exchange you're
going to have to dance for my amusement." Suffice it to say he called my
bluff.

~~~
alnayyir
>as a close friend of the reddit team and heavy duty open source developer
also hangs around in.

I know the significance of what he contributes to Reddit, I've been on Reddit
for a long time and ran into him because of IRC. He's the one that got me my
job :P

I'm not surprised at all that he called your bluff, he's quite the playful
fellow. I was amused when he shared it with the rest of our dev team (the
video).

------
Alex3917
So as an interesting anecdote, a Squidoo lens I have has for the last several
years been the #2 Google result for the phrase 'start a startup,' after this
essay. The page gets on average 45 visits per week, and has sold about 40
startup-related books total over the last 3.5 years.

I think it's interesting because

* The number of people looking to learn about starting businesses seems to be flat or even slightly declining, at least if search traffic is any indicator.

* Based on what I can extrapolate from my analytics and well as my experience playing around with Google / FB ads, it seems like the total number of people searching for information on starting new businesses is on the order of a a couple hundred per week. This is pretty disturbing for a nation of 300M people.

I'm not sure how much validity there is to this, but I've always been a little
disturbed whenever I've done things like, say, comparing the number of
parenting books sold on Amazon to the number of children born each year.

~~~
webwright
<http://www.google.com/trends?q=startup> <\-- Kinda interesting.

That said, whatever you are using to determine that "the total number of
people searching for information on starting new businesses is... a couple
hundred per week" is very very very far off the mark.

Here's a list of some related US searches in the adwords tool:
[http://skitch.com/webwright/dxyg5/google-adwords-keyword-
too...](http://skitch.com/webwright/dxyg5/google-adwords-keyword-tool)

~~~
Alex3917
I'm sure that's true so some extent, but I'd bet the vast majority of 'home
business' searches are people doing lead gen, e.g. 'home business' + 'palo
alto'.

------
watergose
Definitely a brilliant essay, but I might take issue with a possible
interpretation of:

"It's very dangerous to let anyone fly under you. If you have the cheapest,
easiest product, you'll own the low end. And if you don't, you're in the
crosshairs of whoever does."

I definitely understand his point, but I am afraid others might not. This sort
of mentality can lead you to under price your services greatly. I see it
everyday. Our customers sell downloadables and just the other day some guy was
trying to sell a brilliantly manicured and useful spreadsheet for $2. His
competition charged $10-$15+ and looked 10x more confusing and horrible. He
said he wanted to "sell the most possible and low price was the way to do it".

I think I may talked him into raising his price and testing a few different
pricing schemes.

In short: "owning the low-end" isn't always the best way to go about it, you
might be leaving a lot of money on the table and selecting a different set of
customers.

~~~
SwellJoe
I have spent a lot of time thinking about this.

When we started Virtualmin, we had one low-end competitor that charged
slightly less (the software did quite a bit less) and three major high end
competitors that were higher than ours (and have close enough to feature
parity) prices by 25-50%. I figured we were right in the sweet spot for a new
product: not the cheap option, since we can do a lot more than the cheap
option, but a better buy than the big options.

Soon after we started, a new very low end competitor came onto the scene
(about a third of our lowest initial price, and without recurring fees, while
we have annual renewals). And, one of the big three high end competitors got
acquired and discontinued. Same number of competitors (not counting a bunch of
also ran products that aren't competitive for whatever reason), but now we're
right in the middle on pricing and at the top on capability.

Since we're talking about people flying under you, I'll talk about the low end
option. From what I can tell, that low end product sold about four times what
we sold during the time the company existed, though revenue would have been
about the same as ours during that time (because of recurring revenue). So,
this company had four times the customers to support, with the same amount of
resources. Of course, if you can get users helping users, this becomes less of
an issue and more users is better. And, customers that are happy are a much
better marketing value than buying ads or for trade show booths or whatever
else.

Our situation is further complicated by the existence of Virtualmin GPL, which
is the _really_ low priced option in the market (free). Virtualmin GPL
probably has about 30 times the market share of Virtualmin Professional, and
is probably in third place in the market overall now (possibly fourth, but
definitely gaining).

The company behind the low price option went out of business, and the low end
product has since become free. Development has dropped off significantly, and
its market share seems to be slowly shrinking.

In the end of all my contemplating on the subject, we've kept our pricing
pretty much exactly the same: Middle of the pack, but closer to the high end
than the low end. We figure the free product will mop up the really cheap
folks, and when they start making money, we'll probably get some of it for a
Virtualmin Professional license.

What I'm trying to say is: It's hard to know the right price. Flying under
your competitors is great, if you have some significant technical advantage
they don't have (like you have a web-based service vs. their installable boxed
application, or you have a much simpler product that can answer the needs of a
specific niche without the complexity of your competitors). But, if you're
building a complicated product that has only marginal cost advantages over
your competition, it's probably dangerous to significantly undercharge.
Sometimes there are reasons for the prices you see.

~~~
jseliger
In other words, no one knows what the right price is:
[http://joelonsoftware.com/articles/CamelsandRubberDuckies.ht...](http://joelonsoftware.com/articles/CamelsandRubberDuckies.html)
. I suspect most people luck into the "right" price—or don't.

~~~
SwellJoe
Yeah, honestly, our pricing was set by wild-assed guessing. I'm still not sure
it's high (or low) enough.

------
Jun8
Now, I don't want to sound like a hopeless groupie or somesuch, but I don't
know how else to say this... I _love_ this guy!

Too often my hope of ever launching my own startup one day falters after
attending yet another pointless big company Dilbertian meeting or when I give
in and watch a stupid action movie from Netflix that I had watched at least
twice before, rather than learning Rails. After those moments, I read one of
PG's essays and I feel it _is_ possible, I _can_ do it.

Maybe I'll never launch, but just for giving me that hope for a short while, I
love him.

~~~
HeyLaughingBoy
_falters after attending yet another pointless big company Dilbertian meeting_

Really? It's those mind-numbing, pointless time wasters that increase my drive
to go out on my own! Bring on the meetings: it just increases motivation.

Maybe my startup should build a tool for better meetings :-)

~~~
Jun8
You're right :-) But those meetings turn one's mind to mush, so it's hard (or
at least I find it so) to concentrate on something at night.

If you can design an some software/hardware/toy that one can pass time
discreetly during those meetings while pretending to listen, my friend, you'll
have a _huge_ market

~~~
HeyLaughingBoy
iPhone buzzword bingo? :-)

------
gdltec
I would like to see an updated version of this essay. I am sure many things do
not apply or are out of date by now.

~~~
pg
I've been meaning to go through everything I've written and collect the
mistakes. IIRC I was wrong about the low end of the age range here. It was
also a mistake to advise people to work for an existing co for a couple years
before starting their own.

~~~
gdltec
Hopefully you can find the time to do this soon, it will be very helpful for
all of us trying to become successful and change the world (or a piece of it)
with our startups.

------
Ygor
It would be interesting to know how many HN readers have first seen and/or
read this essay just now, after seeing this thread. Or have we all read it
years ago...

~~~
limedaring
It's my first time reading it. I didn't get interested in starting a startup
until a year ago, and only in the last week did I really start seriously doing
it. I'm happy that old articles pop up on HN years after, since I've missed a
bunch.

------
krosaen
A classic, but it's interesting to read alternative ideas to:

>> During this time you'll do little but work, because when you're not
working, your competitors will be.

such as from Jason Fried who recommends _against_ working all the time.

Overall my experience has been: work as much as you can while not burning out
and still enjoying your life overall. You never know how long you'll be at it,
this could be your lifestyle indefinitely especially if you enjoy startups and
may do another even after a big success.

For me so far this has meant incredibly long hours come in spurts, maybe a
burst of 3 days every couple weeks, and otherwise, hours that approach
"normal" (10-12 hour days, take at least one weekend day completely off).

------
callmeed
_"Good people can fix bad ideas, but good ideas can't save bad people."_

That's gold

------
alttab
This was written in 2005, but I can see at least 2-3 businesses that have
cropped up since then that match the end of the "What customers want" section
almost completely. He certainly knows how to find a niche.

------
flexterra
Inspiring. Somebody recommended this essay a couple of months ago and I never
got to reading it until today.

------
johnrob
Hands down the best of his essays, at least among the startup focused ones.

