A Student's Guide to Startups

[A Student's Guide to Startups]

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| Want to start a startup? Get funded by
Y Combinator. |

October 2006

(This essay is derived from a talk at MIT.)

Till recently graduating seniors had two choices: get a job or go
to grad school. I think there will increasingly be a third option:
to start your own startup. But how common will that be?

I'm sure the default will always be to get a job, but starting a
startup could well become as popular as grad school. In the late
90s my professor friends used to complain that they couldn't get
grad students, because all the undergrads were going to work for
startups. I wouldn't be surprised if that situation returns, but
with one difference: this time they'll be starting their own
instead of going to work for other people's.

The most ambitious students will at this point be asking: Why wait
till you graduate? Why not start a startup while you're in college?
In fact, why go to college at all? Why not start a startup instead?

A year and a half ago I gave a talk
where I said that the average age of the founders of
Yahoo, Google, and Microsoft was 24, and that if grad students could
start startups, why not undergrads? I'm glad I phrased that as a
question, because now I can pretend it wasn't merely a rhetorical
one. At the time I couldn't imagine why there should be any lower
limit for the age of startup founders. Graduation is a bureaucratic
change, not a biological one. And certainly there are undergrads
as competent technically as most grad students. So why shouldn't
undergrads be able to start startups as well as grad students?

I now realize that something does change at graduation: you lose a
huge excuse for failing. Regardless of how complex your life is,
you'll find that everyone else, including your family and friends,
will discard all the low bits and regard you as having a single
occupation at any given time. If you're in college and have a
summer job writing software, you still read as a student. Whereas
if you graduate and get a job programming, you'll be instantly
regarded by everyone as a programmer.

The problem with starting a startup while you're still in school
is that there's a built-in escape hatch. If you start a startup
in the summer between your junior and senior year, it reads to
everyone as a summer job.
So if it goes nowhere, big deal; you return to school in the
fall with all the other seniors; no one regards you as a failure,
because your occupation is student, and you didn't fail at that.
Whereas if you start a startup just one year later, after you
graduate, as long as you're not accepted to grad school in the fall
the startup reads to everyone as your occupation. You're
now a startup founder, so you have to do well at that.

For nearly everyone, the opinion of one's peers is the most powerful
motivator of all—more powerful even than the nominal goal of most
startup founders, getting rich.
[1]
About a month into each funding
cycle we have an event called Prototype Day where each startup
presents to the others what they've got so far. You might think
they wouldn't need any more motivation. They're working on their
cool new idea; they have funding for the immediate future; and
they're playing a game with only two outcomes: wealth or failure.
You'd think that would be motivation enough. And yet the prospect
of a demo pushes most of them into a
rush of activity.

Even if you start a startup explicitly to get rich, the money you
might get seems pretty theoretical most of the time. What drives
you day to day is not wanting to look bad.

You probably can't change that. Even if you could, I don't think
you'd want to; someone who really, truly doesn't care what his peers
think of him is probably a psychopath. So the best you can do is
consider this force like a wind, and set up your boat accordingly.
If you know your peers are going to push you in some direction,
choose good peers, and position yourself so they push you in a
direction you like.

Graduation changes the prevailing winds, and those make a difference.
Starting a startup is so hard
that it's a close call even for the ones that succeed. However
high a startup may be flying now, it probably has a few leaves stuck
in the landing gear from those trees it barely cleared at the end
of the runway. In such a close game, the smallest increase in the
forces against you can be enough to flick you over the edge into
failure.

When we first started Y Combinator
we encouraged people to start
startups while they were still in college. That's partly because
Y Combinator began as a kind of summer program. We've kept the
program shape—all of us having dinner together once a week turns
out to be a good idea—but we've decided now
that the party line should be to tell people to wait till they
graduate.

Does that mean you can't start a startup in college? Not at all.
Sam Altman, the co-founder of Loopt,
had just finished his sophomore year when we funded them, and Loopt
is probably the most promising of all the startups we've funded so
far. But Sam Altman is a very unusual guy. Within about three
minutes of meeting him, I remember thinking "Ah, so this is what
Bill Gates must have been like when he was 19."

If it can work to start a startup during college, why do
we tell people not to? For the same reason that the probably
apocryphal violinist, whenever he was asked to judge someone's
playing, would always say they didn't have enough talent to make
it as a pro. Succeeding as a musician takes determination as well
as talent, so this answer works out to be the right advice for
everyone. The ones who are uncertain believe it and give up, and
the ones who are sufficiently determined think "screw that, I'll
succeed anyway."

So our official policy now is only to fund undergrads we can't talk
out of it. And frankly, if you're not certain, you should wait.
It's not as if all the opportunities to start companies are going
to be gone if you don't do it now. Maybe the window will close on
some idea you're working on, but that won't be the last idea you'll
have. For every idea that times out, new ones become feasible.
Historically the opportunities to start startups have only increased
with time.

In that case, you might ask, why not wait longer? Why not go work
for a while, or go to grad school, and then start a startup? And
indeed, that might be a good idea. If I had to pick the sweet spot
for startup founders, based on who we're most excited to see
applications from, I'd say it's probably the mid-twenties. Why?
What advantages does someone in their mid-twenties have over someone
who's 21? And why isn't it older? What can 25 year olds do that
32 year olds can't? Those turn out to be questions worth examining.

Plus

If you start a startup soon after college, you'll be a young founder
by present standards, so you should know what the relative advantages
of young founders are. They're not what you might think. As a
young founder your strengths are: stamina, poverty, rootlessness,
colleagues, and ignorance.

The importance of stamina shouldn't be surprising. If you've heard
anything about startups you've probably heard about the long hours.
As far as I can tell these are universal. I can't think of any
successful startups whose founders worked 9 to 5. And it's
particularly necessary for younger founders to work long hours
because they're probably not as efficient as they'll be later.

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