August 2007
*(This is a talk I gave at the last Y Combinator dinner of the summer.
Usually we don't have a speaker at the last dinner; it's more of a party.
But it seemed worth spoiling the atmosphere if I could save some of the startups from preventable deaths.
So at the last minute I cooked up this rather grim talk.
I didn't mean this as an essay; I wrote it down because I only had two hours before dinner and think fastest while writing.)*
A talk I gave at the last Y Combinator dinner of the summer, to save some startups from preventable deaths.
A talk I gave at the last YC dinner of the summer, cooked up at the last minute to save some startups from preventable deaths.
A couple days ago I told a reporter that we expected about a third of the companies we funded to succeed.
Actually I was being conservative.
I'm hoping it might be as much as a half.
Wouldn't it be amazing if we could achieve a 50% success rate?
Another way of saying that is that half of you are going to die.
Phrased that way, it doesn't sound good at all.
In fact, it's kind of weird when you think about it, because our definition of success is that the founders get rich.
If half the startups we fund succeed, then half of you are going to get rich and the other half are going to get nothing.
If you can just avoid dying, you get rich.
That sounds like a joke, but it's actually a pretty good description of what happens in a typical startup.
It certainly describes what happened in Viaweb.
We avoided dying till we got rich.
It was really close, too.
When we were visiting Yahoo to talk about being acquired, we had to interrupt everything and borrow one of their conference rooms to talk down an investor who was about to back out of a new funding round we needed to stay alive.
So even in the middle of getting rich we were fighting off the grim reaper.
I told a reporter we expected a third of our companies to succeed; I'm actually hoping for half.
Another way of saying that is that half of you are going to die. Since success means founders get rich, half of you will get rich and half will get nothing.
If you can just avoid dying, you get rich. That sounds like a joke, but it's a good description of a typical startup. It's what happened in Viaweb: we avoided dying till we got rich.
It was really close, too. Even while at Yahoo discussing our acquisition, we had to talk down an investor about to back out of a round we needed. Even while getting rich, we were fighting off the grim reaper.
We hope half the startups we fund succeed, which is another way of saying half of you will die. If you can just avoid dying, you get rich.
You may have heard that quote about luck consisting of opportunity meeting preparation.
You've now done the preparation.
The work you've done so far has, in effect, put you in a position to get lucky: you can now get rich by not letting your company die.
That's more than most people have.
So let's talk about how not to die.
Luck is opportunity meeting preparation, and you've now done the preparation: you can get rich simply by not letting your company die. So let's talk about how not to die.
Luck is opportunity meeting preparation. You've done the preparation, so you can now get rich just by not letting your company die.
We've done this five times now, and we've seen a bunch of startups die.
About 10 of them so far.
We don't know exactly what happens when they die, because they generally don't die loudly and heroically.
Mostly they crawl off somewhere and die.
For us the main indication of impending doom is when we don't hear from you.
When we haven't heard from, or about, a startup for a couple months, that's a bad sign.
If we send them an email asking what's up, and they don't reply, that's a really bad sign.
So far that is a 100% accurate predictor of death.
Whereas if a startup regularly does new deals and releases and either sends us mail or shows up at YC events, they're probably going to live.
I realize this will sound naive, but maybe the linkage works in both directions.
Maybe if you can arrange that we keep hearing from you, you won't die.
That may not be so naive as it sounds.
You've probably noticed that having dinners every Tuesday with us and the other founders causes you to get more done than you would otherwise, because every dinner is a mini Demo Day.
Every dinner is a kind of a deadline.
So the mere constraint of staying in regular contact with us will push you to make things happen, because otherwise you'll be embarrassed to tell us that you haven't done anything new since the last time we talked.
If this works, it would be an amazing hack.
It would be pretty cool if merely by staying in regular contact with us you could get rich.
It sounds crazy, but there's a good chance that would work.
A variant is to stay in touch with other YC-funded startups.
There is now a whole neighborhood of them in San Francisco. If you move there, the peer pressure that made you work harder all summer will continue to operate.
We've done this five times and seen about ten startups die. They don't die loudly; mostly they crawl off somewhere and die.
The main sign of doom is when we stop hearing from you. If we email and you don't reply, that's so far a 100% accurate predictor of death. Startups that keep doing deals and showing up probably live.
Maybe the linkage works both ways: if you keep us hearing from you, you won't die. Tuesday dinners make you get more done because each is a deadline. The constraint of staying in contact pushes you to make things happen, so you won't be embarrassed to admit you've done nothing.
If this works it's an amazing hack: get rich merely by staying in contact. A variant is staying close to the whole neighborhood of other YC startups in San Francisco, where the peer pressure keeps operating.
The surest sign a startup is dying is that we stop hearing from it. Maybe the linkage runs both ways: stay in regular contact and the deadline pressure keeps you alive.
When startups die, the official cause of death is always either running out of money or a critical founder bailing.
Often the two occur simultaneously.
But I think the underlying cause is usually that they've become demoralized.
You rarely hear of a startup that's working around the clock doing deals and pumping out new features, and dies because they can't pay their bills and their ISP unplugs their server.
Startups rarely die in mid keystroke.
So keep typing!
The official cause of death is always running out of money or a founder bailing. But the underlying cause is usually demoralization. You rarely hear of a startup pumping out features that dies because its ISP unplugged the server.
Startups rarely die in mid keystroke. So keep typing!
The official cause of death is running out of money or a founder bailing, but the underlying cause is almost always demoralization.
If so many startups get demoralized and fail when merely by hanging on they could get rich, you have to assume that running a startup can be demoralizing.
That is certainly true.
I've been there, and that's why I've never done another startup.
The low points in a startup are just unbelievably low.
I bet even Google had moments where things seemed hopeless.
Knowing that should help.
If you know it's going to feel terrible sometimes, then when it feels terrible you won't think "ouch, this feels terrible, I give up." It feels that way for everyone.
And if you just hang on, things will probably get better.
The metaphor people use to describe the way a startup feels is at least a roller coaster and not drowning.
You don't just sink and sink; there are ups after the downs.
Running a startup is demoralizing; that's why I've never done another. The low points are unbelievably low; even Google had moments that seemed hopeless.
Knowing that helps: when it feels terrible you won't give up, because it feels that way for everyone, and if you hang on things usually get better. The metaphor is a roller coaster, not drowning: there are ups after the downs.
Running a startup is genuinely demoralizing, with unbelievably low points. Knowing the lows are normal and that there are ups after the downs should help you hang on.
Another feeling that seems alarming but is in fact normal in a startup is the feeling that what you're doing isn't working.
The reason you can expect to feel this is that what you do probably won't work.
Startups almost never get it right the first time.
Much more commonly you launch something, and no one cares.
Don't assume when this happens that you've failed.
That's normal for startups.
But don't sit around doing nothing.
Iterate.
Another normal feeling is that what you're doing isn't working. Expect it, because startups almost never get it right the first time. Usually you launch and no one cares. Don't assume you've failed.
But don't sit around doing nothing. Iterate.
The feeling that what you're doing isn't working is normal, because it probably won't work at first. Don't assume you've failed; iterate.
I like Paul Buchheit's suggestion of trying to make something that at least someone really loves.
As long as you've made something that a few users are ecstatic about, you're on the right track.
It will be good for your morale to have even a handful of users who really love you, and startups run on morale.
But also it will tell you what to focus on.
What is it about you that they love?
Can you do more of that?
Where can you find more people who love that sort of thing?
As long as you have some core of users who love you, all you have to do is expand it.
It may take a while, but as long as you keep plugging away, you'll win in the end.
Both Blogger and Delicious did that.
Both took years to succeed.
But both began with a core of fanatically devoted users, and all Evan and Joshua had to do was grow that core incrementally. Wufoo is on the same trajectory now.
So when you release something and it seems like no one cares, look more closely.
Are there zero users who really love you, or is there at least some little group that does?
It's quite possible there will be zero.
In that case, tweak your product and try again.
Every one of you is working on a space that contains at least one winning permutation somewhere in it.
If you just keep trying, you'll find it.
I like Paul Buchheit's suggestion: make something at least someone really loves. If a few users are ecstatic, you're on track, because startups run on morale.
It also tells you what to focus on: what do they love, and where can you find more people who want it? Once you have a core that loves you, all you have to do is expand it, and you'll win in the end.
Both Blogger and Delicious took years, but began with a core of devoted users that Evan and Joshua grew incrementally. Wufoo is on the same trajectory now.
So when no one seems to care, look closely: zero users who love you, or some little group? If zero, tweak and try again. Every space contains a winning permutation; keep trying and you'll find it.
Make something a few users really love, then grow that core. Even a handful of fanatics tells you what to focus on, and every space contains at least one winning permutation.
Let me mention some things not to do.
The number one thing not to do is other things.
If you find yourself saying a sentence that ends with "but we're going to keep working on the startup," you are in big trouble.
Bob's going to grad school, but we're going to keep working on the startup.
We're moving back to Minnesota, but we're going to keep working on the startup.
We're taking on some consulting projects, but we're going to keep working on the startup.
You may as well just translate these to "we're giving up on the startup, but we're not willing to admit that to ourselves," because that's what it means most of the time.
A startup is so hard that working on it can't be preceded by "but."
In particular, don't go to graduate school, and don't start other projects.
Distraction is fatal to startups.
Going to (or back to) school is a huge predictor of death because in addition to the distraction it gives you something to say you're doing.
If you're only doing a startup, then if the startup fails, you fail.
If you're in grad school and your startup fails, you can say later "Oh yeah, we had this startup on the side when I was in grad school, but it didn't go anywhere."
You can't use euphemisms like "didn't go anywhere" for something that's your only occupation.
People won't let you.
The number one thing not to do is other things. If you find yourself saying a sentence that ends with "but we're going to keep working on the startup," you're in big trouble.
Translate these to "we're giving up but won't admit it," because that's what they mean. A startup is so hard it can't be preceded by "but."
Don't go to grad school or start other projects. Distraction is fatal to startups. School is a huge predictor of death because it gives you something to say you're doing: if the startup fails, you can call it the thing you had on the side.
You can't use euphemisms like "didn't go anywhere" for your only occupation. People won't let you.
The number one thing not to do is other things. Any sentence ending "but we're going to keep working on the startup" means you're giving up. Distraction is fatal.
One of the most interesting things we've discovered from working on Y Combinator is that founders are more motivated by the fear of looking bad than by the hope of getting millions of dollars.
So if you want to get millions of dollars, put yourself in a position where failure will be public and humiliating.
When we first met the founders of Octopart, they seemed very smart, but not a great bet to succeed, because they didn't seem especially committed.
One of the two founders was still in grad school.
It was the usual story: he'd drop out if it looked like the startup was taking off.
Since then he has not only dropped out of grad school, but appeared full length in Newsweek with the word "Billionaire" printed across his chest. He just cannot fail now.
Everyone he knows has seen that picture.
Girls who dissed him in high school have seen it.
His mom probably has it on the fridge.
It would be unthinkably humiliating to fail now.
At this point he is committed to fight to the death.
I wish every startup we funded could appear in a Newsweek article describing them as the next generation of billionaires, because then none of them would be able to give up.
The success rate would be 90%.
I'm not kidding.
Founders are more motivated by the fear of looking bad than by the hope of millions. So if you want the millions, put yourself where failure will be public and humiliating.
Everyone he knows has seen that picture; his mom probably has it on the fridge. It would be unthinkably humiliating to fail now. He's committed to fight to the death.
I wish every startup could appear in Newsweek as the next billionaires, because then none could give up. The success rate would be 90%. I'm not kidding.
Founders are more motivated by fear of looking bad than by hope of getting rich. So put yourself where failure would be public and humiliating, like the Octopart founder who appeared in Newsweek.
When we first knew the Octoparts they were lighthearted, cheery guys.
Now when we talk to them they seem grimly determined.
The electronic parts distributors are trying to squash them to keep their monopoly pricing. (If it strikes you as odd that people still order electronic parts out of thick paper catalogs in 2007, there's a reason for that.
The distributors want to prevent the transparency that comes from having prices online.)
I feel kind of bad that we've transformed these guys from lighthearted to grimly determined.
But that comes with the territory.
If a startup succeeds, you get millions of dollars, and you don't get that kind of money just by asking for it.
You have to assume it takes some amount of pain.
And however tough things get for the Octoparts, I predict they'll succeed.
They may have to morph themselves into something totally different, but they won't just crawl off and die.
They're smart; they're working in a promising field; and they just cannot give up.
All of you guys already have the first two.
You're all smart and working on promising ideas.
Whether you end up among the living or the dead comes down to the third ingredient, not giving up.
The Octoparts were lighthearted; now they're grimly determined, fighting parts distributors who want to keep their monopoly pricing by preventing online price transparency.
I feel bad we've transformed them, but that comes with the territory. You don't get millions just by asking; it takes some pain.
I predict they'll succeed. They may morph into something different, but they won't crawl off and die: they're smart, in a promising field, and just cannot give up. You all have the first two. The rest comes down to the third: not giving up.
The Octoparts went from lighthearted to grimly determined under pressure, which comes with the territory. Success needs three ingredients: smart, a promising field, and not giving up.
So I'll tell you now: bad shit is coming.
It always is in a startup.
The odds of getting from launch to liquidity without some kind of disaster happening are one in a thousand.
So don't get demoralized.
When the disaster strikes, just say to yourself, ok, this was what Paul was talking about.
What did he say to do?
Oh, yeah.
Don't give up.
Bad shit is coming. The odds of getting from launch to liquidity without some disaster are one in a thousand. So don't get demoralized.
When the disaster strikes, just say: this is what Paul was talking about. What did he say to do? Oh, yeah. Don't give up.
Bad shit is always coming in a startup. When the disaster strikes, don't get demoralized. Remember the one thing to do: don't give up.