Sunday, September 18, 2005

Great article on starting tech startups

Here's a great article I ran into on starting startups.

Its basically for tech-startups but I think it will make interesting reading for anyone thinking of striking out on his own.


http://www.paulgraham.com/start.html

Some choice quotes from the article.....

QUOTE


"In particular, 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.

"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.


"But the smarter they are, the less pressure they feel to act smart. So as a rule you can recognize genuinely smart people by their ability to say things like "I don't know," "Maybe you're right," and "I don't understand x well enough."

"In a startup, your initial plans are almost certain to be wrong in some way, and your first priority should be to figure out where. The only way to do that is to try implementing them.

"No matter what kind of startup you start, it will probably be a stretch for you, the founders, to understand what users want.

"The best odds are in niche markets

"And while you can outhack Oracle with one frontal lobe tied behind your back, you can't outsell an Oracle salesman. So if you want to win through better technology, aim at smaller customers.

"The way to get rich from a startup is to maximize the company's chances of succeeding, not to maximize the amount of stock you retain. So if you can trade stock for something that improves your odds, it's probably a smart move.

"When everyone feels they're getting a slightly bad deal, that they're doing more than they should for the amount of stock they have, the stock is optimally apportioned.

"Bill Gates was young and inexperienced and had no business background, and he seems to have done ok. Steve Jobs got booted out of his own company by someone mature and experienced, with a business background, who then proceeded to ruin the company. So I think people who are mature and experienced, with a business background, may be overrated.

"You have more leverage negotiating with VCs than you realize. The reason is other VCs. I know a number of VCs now, and when you talk to them you realize that it's a seller's market. Even now there is too much money chasing too few good deals.

"A few steps down from the top you're basically talking to bankers who've picked up a few new vocabulary words from reading Wired. (Does your product use XML?) So I'd advise you to be skeptical about claims of experience and connections.

"as the founders of Google knew, brand is worth next to nothing in the search business. You can come along at any point and make something better, and users will gradually seep over to you

"There is nothing more valuable, in the early stages of a startup, than smart users. If you listen to them, they'll tell you exactly how to make a winning product.

"When you get a couple million dollars from a VC firm, you tend to feel rich. It's important to realize you're not. A rich company is one with large revenues.

"Ever notice how much easier it is to hack at home than at work? So why not make work more like home?

"And for a startup location is very important. The key to productivity is for people to come back to work after dinner

"The most important way to not spend money is by not hiring people. I

"But worst of all, they slow you down: instead of sticking your head in someone's office and checking out an idea with them, eight people have to have a meeting about it. So the fewer people you can hire, the better.

"Don't hire people to fill the gaps in some a priori org chart. The only reason to hire someone is to do something you'd like to do but can't.

"So who should start a startup? Someone who is a good hacker, between about 23 and 38, and who wants to solve the money problem in one shot instead of getting paid gradually over a conventional working life.

"it's hard to repeat a brilliant performance, but it's straightforward to avoid errors.

"Do you actually want to start a startup? What it amounts to, economically, is compressing your working life into the smallest possible space. Instead of working at an ordinary rate for 40 years, you work like hell for four. And maybe end up with nothing-- though in that case it probably won't take four years."


UNQUOTE

Its a long article, and the above are my personal favorites from it - but the whole thing is worth a very good read.

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