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Updated: March 27th, 2020
Paul Graham is one of the most successful venture capitalists of all time. He is best known as the founder of Y-Combinator, an investment fund and startup accelerator which provides seed funding, expert coaching and a platform to launch startups by giving founders the opportunity to pitch to some of the world’s top investors on stage at one of two annual Demo Days. Because they are often made at an early stage, venture capital investments are some of the riskiest investments out there, so a top VC like Paul Graham has had to develop an uncommonly discerning business sense.
Graham may have made his name in tech, but his wisdom can be applied to any business. Here are some of Paul Graham’s best bits of advice for new founders and early-stage employees.
“The way to succeed in a startup is not to be an expert on startups, but to be an expert on your users and the problem you’re solving for them.”
In an essay entitled Before the Startup, Graham discusses a trend he has noticed among founders who appear to be going through the motions of doing all the things that a founder is ‘supposed’ to do. He praises Mark Zuckerberg as someone who “succeeded despite being a complete noob at startups, because he understood his users really well.”
If you don’t understand your customers or their needs, or are merely jumping into business because you’ve identified a current trend (in which case, you may already be too late), you will face huge obstacles in achieving success. Your customers will find someone who does understand them.
You don’t discover penicillin by asking “What are the applications of bread mould?”
— Paul Graham (@paulg) May 27, 2015
Sometimes you can’t know the most important thing you need to know until you start working. Being open to serendipity means noticing details and trends that might indicate whether an unexpected pattern is surfacing in your business. Maybe there’s a use case for your product that you hadn’t thought of. A well executed pivot can be huge.
“At its best, starting a startup is merely an ulterior motive for curiosity, so here is the ultimate advice for young would-be startup founders, boiled down to two words: just learn.”
It’s nearly impossible to predict where your next great idea or insight will come from. However, it is a near certainty that you’re unlikely to generate interesting ideas if you’re not learning all kinds of interesting things whenever possible. Read books, read articles from magazines that smart people trust, or sites that interest you, watch films and documentaries, have conversations with interesting people. Step out of your comfort zone. Learning is never a waste of time, and you may surprise yourself with how your seemingly esoteric knowledge can feedback into your business. Understanding the culture that your customers live in is a huge step toward understanding their needs.
In an essay entitled Startups in 13 Sentences, Graham offers a helpful suggestion: “Merely measuring something has an uncanny tendency to improve it. If you want to make your user numbers go up, put a big piece of paper on your wall and every day plot the number of users. You’ll be delighted when it goes up and disappointed when it goes down. Pretty soon you’ll start noticing what makes the number go up, and you’ll start to do more of that.”
Tracking the number of customers or users you have and figuring out how that correlates to how your business is performing over a clearly defined span of time can form the basis for your next growth strategy. It will keep you focused on the stuff that works and save you time by helping you avoid stuff that doesn’t move the needle.
Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.