The 16 most important reasons why startups succeed (by YCombinator)

Hi there! As a former startup founder, I was regularly wondering “Am I doing it right?”. And while talking to many founders, it seems that this is a very recurring question in the founder ecosystem…

I first wrote an article on the learnings of my failure (20 Basic Principles For Aspiring Entrepreneurs) but this was only based on my own experience.

To broaden the scope, I have also decided to put together a list of the 16 most important reasons why startups succeed given by Sam Altman at YCombinator, directly inspired by this video.

But, who is Sam Altman?

Sam Altman is the president of YCombinator, one of the most successful incubators in the world. He was featured in Inc. Magazine’s Top 30 Entrepreneurs Under 30 and BusinessWeek’s Tech’s Best Entrepreneurs.

Most importantly, Sam is one of the people in Silicon Valley who has “seen” the most startups in recent years, probably above 10,000. He has also invested in nearly 40 startups as a business angel.

Now, what does he say?

1. Have a product that is so good that people will spontaneously tell their friends about. If you think about the most successful companies you know like Google, Facebook or Airbnb, you probably found out about them because a friend of yours said: “You need to try this”.
2. Have a product that is simple to explain and easy to understand. In other words, how would you describe your startup in one sentence?
3. Go on a market that is starting to get exponential growth. In other words, a small TAM (Total Addressable Market) as of today might not be a problem as long as you have strong beliefs on its (future) growth.
4. Play on real trends (vs. fake trends). Real trends usually come with obsessive usage. When the iPhone first came out, early adopters used it for hours every day and it became central to their lives. A fake trend is the opposite. For example, VR may be big someday but today most people we know that own a VR headset never use it or very rarely. So although a lot of people talk about it (and maybe even a lot of people buy them) there’s no intense usage among the early adopters.
5. Have one evangelical founder (usually the CEO), who will be the person that is going to recruit, sell the product, talk to the press, and raise money. This requires someone who can infect the whole world with enthusiasm about what the company is trying to achieve.
6. The team you build is the company you build. Other than picking the right market and building a great product, building a team is the most important thing you do as a founder.
7. Try something hard. It’s easier to start a hard startup than an easy startup. It sounds counter-intuitive but it is mainly because hard problems are meaningful, move people, and thus attract top talent more easily.
8. You need “optimists” in the founding team. The whole world will be telling you why you’re going to fail as a startup so if you don’t have that internal optimistic belief, it’s going to be a nightmare.
9. You need some “idea generators” in the team. You don’t want too many of these people because that’s more ideas than a company can follow but having some people within a company that are just constantly throwing out new ideas is super important.
10. Get the spirit of “we’ll figure it out”. A lot of things will go wrong at some point, there will be situations where you will not be qualified on paper, or you haven’t solved this problem before, or it will feel like it’s going to kill the company. This should not slow you down. Instead, you need people that are in the “we’re going to figure this out” and “we’re going to get this done” mode.
11. You want people to have a bias towards action. As a startup, you never get as much data and time as you would like. So you need people who are willing to act with much less data and certainty than what they would like to have. If they act and that doesn’t work, they adapt really quickly and try something else.
12. Never lose momentum. This is very tough because it means that for the first few years you never get to take your foot off the gas (yes, startups are definitely not the best choice for work-life balance). If you have momentum, people keep delivering results beyond what they think they’re capable of but if you lose momentum, it’s very difficult to get it back.
13. Get a competitive advantage over time. In other words, is there any long term monopoly effect in what you are doing?
14. Get a sensible business model. You don’t have to figure it all out in the beginning but at least you need some ideas on how you will make money at some point.
15. Get a distribution strategy. Again, you don’t have to figure it all out in the beginning but at least you need some ideas on how you are going to get users.
16. Frugality, Focus, Obsession, and Love. Looking at the traits of the best founders in YCombinator, these are the four that came out the more often.

Building a startup is a meaningful decision. If you think that this piece of advice may help any entrepreneurs, please share it.

With LOVE. ❤️

Alex

Note: My name is Alexandre (LinkedIn, Twitter), I am 33, spent 5 years in Investment Banking, co-founded 2 startups, now working as a VC investor. My day to day is about people, technology, sport, music and chasing happiness.

The Best 100 Tech Newsletters

20 Basic Principles For Aspiring Entrepreneurs