How Not to Die -->
Want to start a startup? Get funded by<br>Y Combinator.
August 2007
(This is a talk I gave at the last<br>Y Combinator dinner of the summer.<br>Usually we don't have a speaker at the last dinner; it's more of<br>a party. But it seemed worth spoiling the atmosphere if I could<br>save some of the startups from<br>preventable deaths. So at the last minute I cooked up this rather<br>grim talk. I didn't mean this as an essay; I wrote it down<br>because I only had two hours before dinner and think fastest while<br>writing.)
A couple days ago I told a reporter that we expected about a third<br>of the companies we funded to succeed. Actually I was being<br>conservative. I'm hoping it might be as much as a half. Wouldn't<br>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<br>that way, it doesn't sound good at all. In fact, it's kind of weird<br>when you think about it, because our definition of success is that<br>the founders get rich. If half the startups we fund succeed, then<br>half of you are going to get rich and the other half are going to<br>get nothing.
If you can just avoid dying, you get rich. That sounds like a joke,<br>but it's actually a pretty good description of what happens in a<br>typical startup. It certainly describes what happened in Viaweb.<br>We avoided dying till we got rich.
It was really close, too. When we were visiting Yahoo to talk about<br>being acquired, we had to interrupt everything and borrow one of<br>their conference rooms to talk down an investor who was about to<br>back out of a new funding round we needed to stay alive. So even<br>in the middle of getting rich we were fighting off the grim reaper.
You may have heard that quote about luck consisting of opportunity<br>meeting preparation. You've now done the preparation. The work<br>you've done so far has, in effect, put you in a position to get<br>lucky: you can now get rich by not letting your company die. That's<br>more than most people have. So let's talk about how not to die.
We've done this five times now, and we've seen a bunch of startups<br>die. About 10 of them so far. We don't know exactly what happens<br>when they die, because they generally don't die loudly and heroically.<br>Mostly they crawl off somewhere and die.
For us the main indication of impending doom is when we don't hear<br>from you. When we haven't heard from, or about, a startup for a<br>couple months, that's a bad sign. If we send them an email asking<br>what's up, and they don't reply, that's a really bad sign. So far<br>that is a 100% accurate predictor of death.
Whereas if a startup regularly does new deals and releases and<br>either sends us mail or shows up at YC events, they're probably<br>going to live.
I realize this will sound naive, but maybe the linkage works in<br>both directions. Maybe if you can arrange that we keep hearing<br>from you, you won't die.
That may not be so naive as it sounds. You've probably noticed<br>that having dinners every Tuesday with us and the other founders<br>causes you to get more done than you would otherwise, because every<br>dinner is a mini Demo Day. Every dinner is a kind of a deadline.<br>So the mere constraint of staying in regular contact with us will<br>push you to make things happen, because otherwise you'll be embarrassed<br>to tell us that you haven't done anything new since the last time<br>we talked.
If this works, it would be an amazing hack. It would be pretty<br>cool if merely by staying in regular contact with us you could get<br>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<br>is now a whole neighborhood of them in San Francisco. If you move<br>there, the peer pressure that made you work harder all summer will<br>continue to operate.
When startups die, the official cause of death is always either<br>running out of money or a critical founder bailing. Often the two<br>occur simultaneously. But I think the underlying cause is usually<br>that they've become demoralized. You rarely hear of a startup<br>that's working around the clock doing deals and pumping out new<br>features, and dies because they can't pay their bills and their ISP<br>unplugs their server.
Startups rarely die in mid keystroke. So keep typing!
If so many startups get demoralized and fail when merely by hanging<br>on they could get rich, you have to assume that running a startup<br>can be demoralizing. That is certainly true. I've been there, and<br>that's why I've never done another startup. The low points in a<br>startup are just unbelievably low. I bet even Google had moments<br>where things seemed hopeless.
Knowing that should help. If you know it's going to feel terrible<br>sometimes, then when it feels terrible you won't think "ouch, this<br>feels terrible, I give up." It feels that way for everyone. And<br>if you just hang on, things will probably get better. The metaphor<br>people use to describe the way a startup feels is at least a roller<br>coaster and not drowning. You don't just sink and sink; there are<br>ups after the...