How To Start A Startup (1/3) — Journey

Richard Reis
Nov 28, 2017 · 11 min read
By Richard Reis

Caveat #1: You don’t have to be an expert

“ If I met an undergrad who knew all about convertible notes and employee agreements and (God forbid) class FF stock, I wouldn’t think ‘here is someone who is way ahead of their peers.’ It would set off alarms.” — Paul Graham

Caveat #2: I’m only writing about phase one

“Every single thing in your company breaks every time you roughly triple in size. […]

When you’re just 1 person, everything kind of works. You sort of figure it out.

And then, at some point, you have 3 people, and now, things are kind of different. Making decisions and everything with 3 people is different. But you adjust to that. Then, you’re fine for a while.

You get to 10 people, and everything kind of breaks again. You figure that out, and then you get to 30 people and everything is different, and then 100 and then 300 and then 1,000.

Everything breaks at roughly these points of 3 and 10.

And by ‘everything,’ it means everything: how you handle payroll, how you schedule meetings, what kind of communications you use, how you do budgeting, who actually makes decisions. […]

And then, you turn around and realize… we’re at 400 people now, but some of our processes and systems we set in place when we were 30.” — Hiroshi Mikitani

Meet Your Teacher: Paul Graham

What Is A Startup

Why You Shouldn’t Start A Startup

1. Likely To Fail

2. Financially Risky

3. Stressful

4. All Consuming

“I never took a day off in my twenties. Not one.” — Bill Gates

“When my brother and I were starting our first company, instead of getting an apartment we just rented a small office and slept on the couch. […] We had just one computer so the website was up during the day and I was coding at night. Seven days a week, all the time.” — Elon Musk

5. Takes A Long Time

“I realize I’ve made startups sound pretty hard. If I haven’t, let me try again: starting a startup is really hard.” — Paul Graham

Why You Should Start A Startup

1. Compress Your Work Life

2. Measure Productivity

3. Higher Reward

4. Go Straight To The User

“Why spend twenty years climbing the corporate ladder when you can get rewarded directly by the market?” — Paul Graham

5. Level The Playing Field

Universal Startup Tips

1. Don’t Spend Money

“The main cost of starting a Web-based startup is food and rent. Which means it doesn’t cost much more to start a company than to be a total slacker. You can probably start a startup on ten thousand dollars of seed funding, if you’re prepared to live on ramen.” — Paul Graham

2. Get Ramen Profitable

“A startup with a couple founders in their early twenties can have expenses so low that they could be profitable on as little as $2000 per month. That’s negligible as corporate revenues go, but the effect on your morale and your bargaining position is anything but. At YC we use the phrase ‘ramen profitable’ to describe the situation where you’re making just enough to pay your living expenses. Once you cross into ramen profitable, everything changes. You may still need investment to make it big, but you don’t need it this month.” — Paul Graham

3. Grow, Grow, Grow!

“We encourage every startup to measure their progress by weekly growth rate. If you have 100 users, you need to get 10 more next week to grow 10% a week. And while 110 may not seem much better than 100, if you keep growing at 10% a week you’ll be surprised how big the numbers get. After a year you’ll have 14,000 users, and after 2 years you’ll have 2 million.” — Paul Graham


Personal Finance Series by Richard Reis

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Richard Reis

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"I write this not for the many, but for you; each of us is enough of an audience for the other." - Epicurus

Personal Finance Series by Richard Reis

Learn (in 52 letters) the finance basics used by early retirees.