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Summary:

Last week, when down in Los Angeles, I had a chance to interview Paul Graham, co-founder of YCombinator on-stage at the Twiistup conference. The wide ranging conversation spanned a good 45 minutes and generically talked about the Internet start-ups and entrepreneurship. Here are some highlights.

Last week, when down in Los Angeles, I had a chance to interview Paul Graham, co-founder of Y Combinator, onstage at the Twiistup conference. The conversation, which spanned a good 45 minutes, was wide-ranging but generally focused on Internet startups and entrepreneurship.

Given that I was on stage, it was hard to take notes. Nevertheless, I have re-constructed the conversation from memory, some of my own notes and with the help of tweets being sent out by the audience members. Only the comments that appear in parenthesis can be attributed to Paul, while rest is paraphrased. Some folks on Twitter are misconstruing these notes as an interview, which it is not. I hope I have made myself abundantly clear.

What should entrepreneurs think about to start company?

Think about finding the right co-founder. He compared co-founder of your company to location to your real estate property because once you buy your property, you’re stuck with the location. And similarly you can’t morph your co-founder. “The (startup) idea does not matter as much as having the right co-founder.”

What makes a startup successful?

Success of a start up is dependent upon whether co-founders want it enough.
People tend to over emphasize the brilliance of idea. For any successful start up idea, you can find 20 bitter losers who say “I had that idea 20 years ago.” This shows you that it’s the people, not really the idea that matter. “The most important thing is to be DETERMINED. Measure of determination is not quitting and not giving up.”

What is the biggest challenge for early stage startup?

The enemy is the “back button.” Once people leave they don’t come back. In order to get people to return and install your product or a service, “You got to understand what people need.” And you do that by finding out what people need, what you need need.You’ve got to create something that a real person needs.

Is starting a company easy these days?

The startups are cheap in the beginning, considering that founders don’t have to pay them selves. And everything you need to do a start up you already have. Computer, internet, and you can buy server per usage. So it doesn’t really cost anything more to do a start up than ordinary life.

What is the right time to start looking for money?

You should only start looking for money when you can convince investors to give it to you. In fact, raise money when you don’t particularly need it and not because you are broke.

Do you feel some start ups don’t think big enough?

Some startups don’t think big enough, while some do. Paul in an email later clarified:

“The point there was that I ask founders what huge thing is what you have now version 1 of?”  and a good way to come up with answers to that is to imagine themselves being interviewed 10 years from now when they are big successes, and telling the story of how they did it.  E.g. “The first thing we made was x, and then we expanded into y, and then we tried z, and that really took off.”  That implies the next thing to try after x is y.”

explained that he asks founders about “what huge thing is that you now have version one of?” One way of finding an answer to that question is to imagine themselves being interviewed 10 years from now when they are big successes, and telling the story of how they got there. In other words, “the first thing we made was x, and then we expanded into y and then we tried z, and that really took off.”

The following question was from the audience: What do you think about other incubators such as Techstars?

I checked with Paul and this is how he remembers it. “Partly annoyed, like JK Rowling would feel if someone wrote a
book about a boy wizard called Henry Porter.  But one good thing about them is that they tell us when we make mistakes.  If it weren’t for them, we’d be less likely to know if we turned down someone good.”

Slightly annoyed. It is like how JK Rowling would feel if someone wrote book called Henry Potter. One use is that it tells us when we have made mistakes and passed on good applicants. So if it was not for other incubators,  Y Combinator would never know that they turned down successful start up.

Related GigaOM Pro Content:

Photo of Paul Graham by Jim Alden via Flickr.com/Techfrog

  1. you are absolutely right about staring up an online company at little cost, because anyone today can virtually become an inernet millionaire, in 3 years

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    1. Sarcastic! Are we? ;-)

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  2. Isn’t “Imitation the sincerest form of flattery”? Harry Potter can fulfill the needs of anyone that wants to read about that sort of thing, PG can not fund all start ups that need/deserve funding (or can he?). Why does he find it annoying? I am sure he tells his pupils that other companies copying their business model is just a sign that they have been successful and not to worry too much about them.

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  3. “what huge thing is that you now have version one of?”

    Parse error. Is there a word missing? I could make a guess, but I want to get Paul’s meaning correct. Can you clarify whether this it a typo, or really what he said?

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    1. Mark, I think he is saying: “What huge thing have you completed version 1 of?” Once you have more time and money, this is the idea that you feel will define your company; however, right now you have a more limited working version of it.

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    2. Mark

      I tried to clear it up after getting on email with Paul, so let me know if you still have trouble understanding what was clearly my inability to be articulate.

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  4. A Russian author did write a story about a Russianized Harry Potter and J.K. Rowling’s company sued them and successfuly blocked publication of the book. So J.K. Rowling is more than “slightly annoyed” in that scenario.

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  5. Romario Gonzales Monday, February 1, 2010

    “what huge thing is that you now have version one of?”

    Parse error. Is there a word missing?

    Thanks for notifying that Mark. As someone who speaks English as a second language, I also paused when I came across that weird sentence. Maybe it’s because the writer has re-constructed the conversation.

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  6. A couple of paragraphs seem to be repeated in this piece.

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  7. If this is truly how he feels about other programs similar to his then I feel sorry for him.

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  8. [...] Notes From a Conversation With Y Combinator’s Paul Graham — Paul Graham is an accomplished entrepreneur, essayist, and venture capitalist (through his Y Combinator program).  I always enjoy reading things he writes and watching interviews with him.  I thought these notes were kind of the Paul Graham CliffsNotes, as it gives a nice, quick 30,000 view of his overall philosophies on entrepreneurship.  If you enjoy this, I definitely recommend you delve into some of his writing on his site. [...]

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  9. I love that he’s still annoyed by tech stars. It just shows how competitive he is, even with his incubator which I assume runs much like a successful startup.

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  10. [...] Shared Notes From a Conversation With Y Combinator’s Paul Graham. [...]

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