What's Different about "Unicorns"

This is the talk I gave at the Female Founders Conference 2017. 

Last year I spoke about all the problems that can arise in a startup and how to avoid them. And to be honest, I think last year's talk is the best general startup advice I could give you. So if you haven't read it before, please do.

And it would be worth re-reading even if you have, because a lot of these problems are the kind that get you even when you think you're already watching out for them.

Last year, I ended by saying that I wanted there to be more women founders of the big winners, of the so-called unicorns. These are the founders who make the most influential role models, and role models are what we need most if we want to encourage more women to start their own companies.

In recent years there’s been an increase in the number of women starting startups, and in the number who’ve raised significant seed and Series A rounds. This is good.

Now we’ve got to focus on the next target: more women-founded billion dollar companies. So that's what I'm going to talk about today: what it takes to start a startup that's not merely successful, but massively successful.

I'm not saying everyone has to do this. You don't have to start a startup. And if you do start one, you don't have to start a Google. But if you do want to start a Google, or think you might, what does it take? What's the difference between a successful startup, and a super-successful startup?

Fortunately I've seen enough of both types at close hand that I can see patterns of differences. I made a list of the things that I think are different about the unicorns, and there are 9 of them.

1. Be lucky

I want to get this one out of the way right from the start. In addition to everything else they need, the unicorns are lucky. One of the most important kinds of luck is timing. The most successful founders have the right idea at the right time. And you have less control over that than you might think, because the best ideas are not deliberate: they tend to grow organically out of the founders' lives.

However, while all the most successful founders are lucky, none are merely lucky. It is never a matter of having a great idea and then boom, a few years later you're a billionaire. Far, far from it.

2. Have the right motives

One of the most noticeable differences between the founders of super successful and moderately successful startups is their motives. And in particular, the founders of super-successful startups are never in it mainly to get rich or to seem cool. They're always fanatically interested in what the company is doing.

Incidentally, it’s perfectly fine to start a startup mainly for the money. But unless your motives change in the course of it, it probably won't wind up being a really big one.

There are multiple reasons why startups do better when the founders are truly interested in the idea. They work harder, since they love the work, and their enthusiasm is infectious. They think longer term. And they are much harder for another company to capture with an acquisition offer, because they don't actually want to quit.

3. Hit a big need

This one may sound obvious, but huge startups need huge markets. You have to make something a lot of people will pay for, or people will pay a lot for.

And this is one place luck has a big effect, because market sizes are impossible to predict.

For example, the Airbnbs didn't know how many people would want to stay in other people's homes. All they knew was that enough people would to make the idea worth working on. The founders of the most successful startups never realize, in the beginning, how big they're going to get.

So our advice at Y Combinator is not even to try to hit a big market early on. Since you can't predict these things, it's better just to work on something you yourself want, and then hope there will be lots more people like you.

4. Do something basic

When you describe the biggest startups, most all of them are doing something very basic. Google is how you find information. Facebook is where your friends are. Uber drives you places. Airbnb gives you somewhere to sleep. These are all things you could explain in a few words to a five year old.

However don't use this as a test for what to work on, because ideas often start out less general.  At first Facebook wasn't where everyone's friends were; it was just where a couple thousand Harvard students were.

5. Be willing to work on a dubious idea

A site for a couple thousand students at one college doesn't sound like a very promising idea, does it? It may seem like a promising idea now, because we know how the story turned out, but it didn't at the time. Almost all the really big startups seem like dubious ideas at first. I know exactly how Airbnb's idea seemed at first, because I was one of the people whose job was to judge it, and I didn't think much of it at the time.

It's not just that these ideas don't seem as big at first as they later turn out to be. They seem to most people like bad ideas.

You need to be a certain kind of person to work on one of these bad ideas that turn out to be good. You need to be independent-minded. You can't care what other people think. It's now part of the conventional picture of a successful founder to be a maverick, and that part of the conventional picture is very accurate. I can't think of one that I'd describe as a conformist.

6. Not be afraid of a big idea

You also have to be ambitious. Because what happens with these initially unpromising ideas is that they blossom into terrifyingly big ones. You start a site for college students, and pretty soon you realize you could expand to sign up the whole world if you wanted to.

At this point most people's reaction is fear. Signing up the whole world sounds like a lot of work. It also sounds like a valuable prize, and you have to fight to win those.

The fear of big ideas prevents most people from even realizing they could expand a site for college students into a site for the whole world. But a few people are more excited than afraid when this happens.

7. Be driven and resilient

Another thing I notice about the founders of the really huge startups is that I would not want to stand between them and something they wanted. All of them, 100%, have exceptional drive.

But, it’s not always straightforward to tell how driven someone is. Drive can be suppressed when someone else has authority over you, like in most schools and jobs. In these situations, people who are really driven may even read as less promising than people who are merely obedient. So not only is it often hard for me to tell how driven someone is, people often can't even tell themselves.

You can tell after they start a startup though. No one has authority over you in a startup. Most people find that authority vacuum uncomfortable. But a few expand into it. A few think, "Ah, this is how life was meant to be."

8. Focus: Life’s Work

Drive by itself isn’t enough though. You have to be driven to work on this particular company. In all the really huge startups, the company is at least one founder's life's work. So they'd never willingly be acquired, for example. If you sell your life's work, then what are you supposed to do?

9. Be able to evolve into a manager

Early on, starting a startup is all about the product. But that changes when a startup gets really big. A founder who wants to keep running the company has to become a manager. You don't need to have management ability initially. There's plenty of empirical evidence to show that you can learn this on the job. But you do have to be able to learn it. You probably even have to like it.

Designing cool products and managing people are very different things. Most people who like building things dislike the idea of being a manager. It's a rare person who can be great at both. But you have to be to create one of the really big startups.

Those 9 things, as far as I can tell, are the differences between startups that are merely successful and the ones that become really big.

But they're not just a list. When you put them all together, they make a story of how a "unicorn" happens. The founders work on something their own experience shows them the world needs.  It wouldn't seem like a promising idea to most people, but they work on it anyway, partly because they understand the promise of the idea better, and partly just because they think it's cool. As they work on the idea, they realize it could become even bigger than they thought. Instead of shrinking from that realization, they embrace it eagerly. This, they realize, is what they want to do with their lives. And they are so committed to the company that they're willing to morph themselves into whatever it needs.

There’s a lot of variety in startups, but this is the most common path for the really big ones.

Remember, you don't have to start a startup, and if you do, it doesn't have to be a "unicorn." But if you do, this is probably what it will look like: an unpromising idea that blossoms into a frighteningly big one, and driven founders who see that opportunity and run with it.

I'm hoping that there are some of you in this audience who hear this description and think, "Oh my God, it's like she's describing me!" The people on the path to being huge don't usually realize it, early on. But I'm hoping that if I can encourage just a few of you to keep going, then when you succeed, your example will encourage a wave of new women founders.

Yes, this is a very long-term plan. But, after all, this is my life's work.

Y Combinator When No One Cared

Recently I came across one of the first pitch letters I sent to journalists about Y Combinator. It was from the first few months of YC’s existence and it’s a snapshot of what our thinking was way back in the early days in 2005. It also reminded me that no reporters ever responded to my email.

  From: Jessica Livingston

  ...We’ve recently kicked off the Summer Founders Program, a new
  program that lets people start startups as a summer job. [Background:
  We’re testing a theory that technology is enabling a new model
  to evolve where founders of startups can be a lot younger than
  they used to be. As the age of startup founders creeps downward,
  we foresee an alternative path for the smartest and most ambitious:
  instead of going to work for Microsoft, they start a startup and
  make Microsoft buy it to get them.
  We got 237 applications (in less than two weeks!), from which we
  chose 8 to fund. They're doing very varied things: click fraud,
  software for cell phones, a dating site, a news aggregator, desktop
  search, etc. Each group has recently moved to Boston, received
  funding from us, and incorporated etc.
  One thing that’s different about Y Combinator is that the three
  other founders have deep technical backgrounds (founders of Viaweb,
  a startup that developed the first web-based application, which
  was sold in 1998 to Yahoo) and we believe this gives us an edge
  in terms of picking good ideas even before a business plan exists
  and providing important technological advice early on...

The "news aggregator," incidentally, was Reddit.

We hadn’t even realized then that one of the most innovative aspects of Y Combinator would be funding companies in batches and thus applying mass production to startups. Instead, I played up the idea that it was now easier for younger people to start startups.

I admit that I was never very good at PR. This pitch isn’t very gripping, except maybe in hindsight. But if anyone had clicked on the link to the Summer Founders Program (SFP) background description, they could have discovered some new ideas that would redefine the way early stage tech funding happened.

When I reread the SFP description, I find the diffs between then and now fascinating. For example, we thought it would be ok to work on your idea each summer and go back to school in the fall. We gave founders $6,000 per person.  There’s a vague offer to help with getting follow-on funding, which during the summer evolved into Demo Day.

But most of what’s in there is spot on. 12 years later, YC hasn't strayed too far from its origins.

It’s fun for me to think about our origins. They are happy memories. We were working on something that we were really excited about and that was totally new, and we got to watch as it started to work almost immediately. And since no one cared about us at all, we were free to focus entirely on helping the startups.  And of course no one cared about the startups either. YC was a little group of people everyone ignored, working together to do new things with no distractions.

It’s also a lovely reminder to me how new ideas start small. Small but onto something. Keep working on something that a few people love. The press may ignore you, but users won't, and that's what matters. Laboring away in obscurity, as frightening as it feels at the time, is the way a lot of good things happen. Maybe the way most good things happen.

The Sound of Silence

I recently heard one of the more interesting insights about Silicon Valley I'd heard in a while. It explained something I’d wondered about for years.

But I can't tell you what it was.

There's too much downside in sharing any opinion that could easily be misinterpreted online. Even facts are dangerous to share if they don’t align with what people want to believe. 

There's a lot of concern about "fake news" lately. That is a real problem, but there's also the opposite problem: true things that aren't being said.

Some of the most useful things I've learned about startups over the years are also things I'd never share publicly. Not because the ideas are necessarily controversial in their own right, but because anyone could twist them to seem controversial if they were sufficiently motivated to. And when that happens I immediately regret having said anything. It's a massive distraction. I have two young kids, and I have hundreds of startups to keep track of. I don't have time to fight with people who are trying to misunderstand me.

Not surprisingly, the juiciest targets for this sort of willful misinterpretation are organizations and people who are successful. They have power, and power makes them both interesting and envied; I teach founders they all have to be prepared for this as their startups grow. 

In my blog post, "Subtle Mid-Stage Startup Pitfalls" I said:

       You can't prevent yourself from being a target. It's an automatic
       consequence of being successful. So the best you can do is react
       in the right way when people attack you. To some extent you have
       to resign yourself to letting people lie about you.

The problem with this is, the most successful people in an industry tend to have some of the most valuable insights about it. So you lose a lot when they are silenced.  And also, if they keep those insights to themselves, it makes the powerful more powerful. It means useful information remains amongst insiders, like me, for example.

Another downside of friction in sharing ideas publicly is that we lose the conversation they would have generated. Before Twitter et al, and before the media were so reliant on page views, Paul wrote an essay called “What You Can’t Say.” In it he said:

       The trouble with keeping your thoughts secret, though, is that
       you lose the advantages of discussion. Talking about an idea leads
       to more ideas. So the optimal plan, if you can manage it, is to
       have a few trusted friends you can speak openly to.

Thirteen years later, that's my default plan. There’s just too much downside for me to get distracted with others’ opinions of my opinions. [1] It's not that I'm afraid of expressing my opinions. I just think, "Why bother?"

It's great that technology has given more people a voice on the internet. But that doesn't necessarily mean less friction in sharing ideas, because some of those voices are shouting down the others.

How do we solve this problem? I don't know, but I hope there is a solution. I hope we’re just in the social media 1.0 phase, and that technology will eventually bring us a social media 2.0 where one can speak more openly. [2] 

I’m horrified at the prospect of the most insightful people in their fields thinking, "That's something I should comment on. Nah, what's the point? Too much downside." 

That's what happens now, and we don't even know how much, because how do you measure the sound of silence? 


[1] One of my favorite parts of “What You Can’t Say”:

       Darwin himself was careful to tiptoe around the implications of
       his theory. He wanted to spend his time thinking about biology,
       not arguing with people who accused him of being an atheist.

[2] One reason I have hope for a solution is that I do find I can speak more openly on Facebook than elsewhere, so maybe that’s a clue about what direction social media 2.0 might take.

Don't be Too Busy to Vote

I’m embarrassed to admit that I didn’t vote in the last presidential election.

I was so busy with 2 small children and a fast-growing company that I could barely keep up with everyday life.

I rationalized my decision to blow off voting by telling myself California would surely choose Obama anyway (it did). Why did my vote really matter?

Looking back, I realize how wrong I was. California would not have chosen Obama if all of his other supporters had been as lazy and disorganized as I was. Everyone's vote matters. And in this election, especially, your vote really matters, because the stakes are so high. Donald Trump is the most dangerous candidate I've seen in my lifetime.

This election I've already voted. I hope Hillary wins, but if Trump wins I'll at least be able to tell myself I voted against him.

(If you live in California like me, there is another very important reason to vote: to end the death penalty.)

Please don’t let the day-to-day business of life make you feel too busy to vote on November 8. Make a plan now about when and where you'll vote. Research shows people are more likely to vote if they make a specific plan to. 

VotePlz can help you find your polling place.

This may be the most important vote you cast in your life.

What Makes Founders Succeed

I recently dug up my introduction to Founders at Work, which I wrote in 2006, and I was amazed how accurate it still seems:


Some kind of magic happens in startups, especially at the very beginning, but the only people there to see it are the founders. The best way to understand what happens is to ask them, so that’s what I did.

In the book, you’ll hear the founders’ stories in their own words. Here I want to share some of the patterns I noticed. When you’re interviewing a series of famous startup founders, you can’t help trying to see if there is some special quality they all have in common that made them succeed.

What surprised me most was how unsure the founders seemed to be that they were actually on to something big.  Some of these companies got started almost by accident. The world thinks of startup founders as having some kind of superhuman confidence, but a lot of them were uncertain at first about starting a company. What they weren’t uncertain about was making something good—or trying to fix something broken.

They all were determined to build things that worked. In fact, I’d say determination was the single most important quality in a startup founder. If the founders I spoke with were superhuman in any way, it was in their perseverance. That came up over and over in the interviews.

Perseverance is important because in a startup nothing goes according to plan. Founders live day to day with a sense of uncertainty, isolation, and sometimes lack of progress. Plus startups, by their nature, are doing new things, and when you do new things people often reject you.

That was the second most surprising thing I learned from these interviews: how often the founders were rejected early on. By investors, journalists, established companies—they got the Heisman from everyone. People like the idea of innovation in the abstract, but when you present them with any specific innovation, they tend to reject it, because it doesn’t fit with what they already know.

Innovations seem inevitable in retrospect, but at the time it’s an uphill battle. It’s curious to think that technology we take for granted now, like web-based email, was once dismissed as unpromising. As Howard Aiken said: “Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.”

In addition to perseverance, founders need to be adaptable. Not only because it takes a certain level of mental flexibility to understand what users want, but because the plan will probably change. People think startups grow out of some brilliant initial idea like a plant from a seed. But almost all the founders I interviewed changed their idea as they developed it. PayPal started out writing encryption software, Excite started as a database search company, and Flickr grew out of an online game.

Starting a startup is a process of trial and error. What guided the founders through this process was their empathy for the users. They never lost sight of making things that people would want.

Successful startup founders typically get rich from the process, but the ones I interviewed weren’t in it just for the money. They had a lot of pride in craftsmanship. And they wanted to change the world. That’s why most have gone on to new projects that are just as ambitious. Sure, they’re pleased to have more financial freedom, but the way they choose to use it is to keep building more things.

Startups are different from established companies—almost astonishingly so when they are first getting started. It would be good if people paid more attention to this important but often misunderstood niche of the business world, because it’s here you see the essence of productivity. In its plain form, productivity looks so weird that it seems to a lot of people to be “unbusinesslike.” But if early stage startups are unbusinesslike, the corporate world might be more productive if it was less businesslike.

My goal with these interviews was to establish a fund of experience that everyone can learn from. You’ll notice certain classes of problems that constantly bit people. All the founders had things they wished they’d known when they were getting started. Now these are captured for future founders.

I’m especially hoping this book inspires people who want to start startups. The fame that comes with success makes startup founders seem like they’re a breed apart. Perhaps if people can see how these companies actually started, it will be less daunting for them to envision starting something of their own. I hope a lot of the people who read these stories will think, “Hey, these guys were once just like me. Maybe I could do it too.”


I often get asked if I'll write another volume.  Most likely yes, but I'm not sure when. With 2 kids and over 900 investments, I just don't have the long, beautiful stretches of time I used to.

Founders at Work took a lot of time.  I prepared a lot before each interview. I transcribed the tapes (yes, tapes) myself, which helped me do a better job of editing. Each introduction, though only a few paragraphs, often took a day or two. I cared so much that this book be good. It wound up being the publisher's best selling book the year it came out, and I still get people telling me that it inspired them. I don't want to write another one till I have the time to work as hard on it as I did on the first.

If I had the time though I'd start tomorrow. Often familiarity with something kills your excitement, but 900 startups later I'm still just as excited about them. Startups are fascinatingly complicated.  I wrote in the introduction to Founders at Work that I wanted "to share some of the patterns I noticed." I'm still trying to find the patterns.

7 Important Lessons from Airbnb's 7 Rejections

I am so happy Brian Chesky shared these rejection emails from Airbnb's early days. I am constantly reminded how most every successful startup began small and faced various types of rejection early on. Most YC startups tell us that fundraising is harder than they anticipated, even though we do a lot to prepare them for it. New startups: please remember how many times you can get turned down by investors before you finally wind up getting funded.

I came up with 7 points that these rejections remind me of:

1) Fundraising is hard. You don't realize how hard until you try it. 

2) Even the most successful startups often had troubles fundraising when they first got started. 

3) New ideas often seem crazy at first (e.g. renting out an airbed in your apartment to a stranger).

4) When investors aren't sure what to make of these ideas, they write them off as inconsequential. Don't be misled by this into thinking your idea actually is inconsequential.

5) Believe the no and not the why when investors turn you down.

6) All investors make the mistake of overlooking good ideas. I have myself. 

7) Keep going! Brian, Joe and Nate are one of the best examples of determined founders. They kept going in the face of so much rejection (more than just these 7 emails) because they knew, as the first Airbnb hosts, that their idea was good. 

Why Startups Need to Focus on Sales, Not Marketing

I published this article about a year ago on the Wall Street Journal's Accelerators forum. I think the content is still very relevant to early stage startups, so I thought I'd post it on my personal blog. 

The most important thing an early-stage startup should know about marketing is rather counterintuitive: that you probably shouldn’t be doing anything you’d use the term “marketing” to describe. Sales and marketing are two ends of a continuum. At the sales end your outreach is narrow and deep. At the marketing end it is broad and shallow. And for an early stage startup, narrow and deep is what you want — not just in the way you appeal to users, but in the type of product you build. Which means the kind of marketing you should be doing should be indistinguishable from sales: you should be talking to a small number of users who are seriously interested in what you’re making, not a broad audience who are on the whole indifferent. Click here to read the full article on the WSJ

Subtle Mid-Stage Startup Pitfalls

(This post is derived from a talk I gave at SV Angel's CEO Summit.) 

A lot has been written about the dangers that early-stage startups face. But startups face a different and equally lethal set of dangers in what we could call the mid-stage–the stage after the company has figured out what it's doing and has raised some money to go off and do it.

Because of where YC sits on the funding timeline and the volume of startups we fund, there is probably no one who has watched more companies negotiate the mid-stage than us. Twice a year we accept a batch of startups (the last one had 114 companies in it). We work with them for several months on whatever is their biggest problem, and then help them raise money from investors. After that, they go off into the world to execute their plan.  And you know what? A lot of them fall into traps of various sorts. I'm going to give you a list of the worst pitfalls I see, and explain how to avoid them.

We’ve now funded more than 800 startups. One advantage of having so much data is that we can recognize patterns pretty clearly. Every one of these traps is one we've seen startup after startup fall into. And many of you who read this post will fall into these traps, even though I've already warned you about them. That's how dangerous they are.

It never gets any easier.

The first trap is feeling that now you can relax. You told yourself that all you needed to do was get x–get that funding round, get that big deal, or whatever. Then everything would fall into place and you could relax a bit. So when the startup finally gets x, founders think they can relax. But they shouldn't. If you find yourself feeling you can relax, that means you're overlooking something, because the one thing all the most successful founders we've funded agree on is that it never gets any easier.

Pete Koomen of Optimizely gave a talk at a YC dinner a couple years ago and he said, “When I was sitting here at dinner during my YC batch and I'd listen to the successful guest speakers, I always thought somehow they were just coasting. And what I now realize is that they weren't just coasting. The more successful you are, the harder the job gets.”

It doesn't get any easier. It gets different. As your company grows, things stay as hard but the nature of problems change. In the beginning you are asking yourself questions. What should we build? and How do we get users? Later on you’ll have new questions to ask yourself. Are your employees happy? What should your culture be? What sort of structure should you have? Are your investors causing problems?  Did someone just poach your top engineer? Can your employee not get into the country? What should you do about the lawsuit against you? The list goes on. 

It's important to realize that it doesn't get any easier because it reminds you how tough you have to be. You can't let yourself get beaten down.

Startups are a long haul. If you want to be one of the really big successes you need to commit yourself for something like 5-7 years minimum. In cases like Facebook and Google, it's a life's work. Pace yourself. Because you can't keep burning the candle at both ends forever.

Sometimes, however, a startup is not your life's work. Maybe you’ll decide you want to get acquired after a few years. But even if that's what you want, you have to work on the company for those few years as if it were your life's work. (I'll talk more about that later.)

Don't go through the motions.

At Y Combinator, we sometimes see startups behaving after Demo Day like someone going off a strict diet. During YC they're virtuous: they work hard on their product, focus on users, and avoid distractions.  They’re also checking in with us regularly. But after they raise money, some founders go on a sort of bender. They rent a fancy office, hire too many people, spend too long shipping the next version, waste lots of time schmoozing and going to events, etc.

Why do they do this?  Probably because they want to seem cool. They see other startups with fancy offices and lots of people and grand plans.  They want to seem as impressive, so they do the same thing.

Do they know they're competing in the wrong race, and that the right race is not office space or number of employees, but revenue growth? Do they know that all these distractions will actually make it harder to compete in the right race? I think they're mostly in denial about both of these facts.  The money they’ve raised goes to their heads, like a 20-year-old musician who suddenly makes a lot of money.

I've seen many startups shift from doing more with less to doing less with more once they've raised funding. It's easy to think money can buy your way out of problems. Don't like sales and calling users? Hire a salesperson. No one’s using your product? It must be because people don't know about it. Hire an expensive PR firm to get the word out. Those are both not merely lazy, but the wrong thing for a startup to do.

When you don't have enough money, circumstances force you to be virtuous. Once you've raised a lot, you have to force yourself to be virtuous.

The even worse danger is that you stop holding yourself accountable. You kind of have to stop holding yourself accountable when you start doing the wrong things, because otherwise alarms would be going off all the time.  You stop measuring and you stop checking in with investors.

Then, you're doubly screwed: you're not only doing the wrong things but you've also turned off the alarms that warn when you're doing the wrong things. Why do founders do this? I suspect because in the back of their minds, they know they’re screwing up, and they want to hide it in hopes that things will get better. But denial is not going to save you. If you have to err in one direction, err in the direction of worrying that you're failing when you're not. 

(Incidentally, when I try to think of YC founders who always worried they were failing, you know who comes to mind? Brian Chesky. So it shouldn't feel like it's a sign of failure to worry that you are failing.)

Don't for a second be in denial if things are going badly or growth is flat. If you're vigilant about diagnosing problems like these, you'll be more likely to nip them in the bud. The sooner you acknowledge that growth is flat, for example, the more time you’ll have left to fix it.

You are going to have to become a recruiter.

One of the counterintuitive things about running a successful startup is that hiring tends to be your biggest problem. Who would have thought, back when you were desperately trying to build the product and get users, that you'd someday have to be a recruiter?

As a founder you're probably a product person. You probably don’t know or care much about recruiting. But once your company reaches a certain point, that's going to have to become a big part of your focus, and you'll only continue to succeed to the extent you do it well.

                           “The secret of my success is that we have gone to exceptional
                            lengths to hire the best people in the world. And when you're in
                            a field where the dynamic range is 25 to 1, boy, does it pay off.
                                                                                                                    —Steve Jobs

Steve Jobs was the quintessential product person. But do you know what he said was the secret of his success? Hiring the best people.

If you're based in the Bay area especially, recruiting will be hyper-competitive. You'll need to convince talented people to join your startup rather than the hundreds of others they can choose from.

When you first get started, you can recruit people from your immediate network of friends and colleagues. But as you grow, you’ll be hiring many different types of people for many different types of roles, so it gets much harder.

Don't hire too fast.

I've just told you that successful startup founders need to become recruiters, but I'd caution against starting to hire too fast.

Hiring too fast makes your company both expensive and rigid. Expensive shortens your runway and rigid makes it hard to change direction easily. This means that, unless you are pointed in exactly the right direction, you now have a recipe for killing yourself.

I've seen a lot of startups get a bunch of money and hire people almost indiscriminately because they think in order to be successful, they need a big team. They also may think that more people means faster progress, but that's not really true. In fact, as we've known since Fred Brooks wrote "The Mythical Man Month," it can sometimes have the opposite effect.

On a related note: don’t hire sloppily. Most mid-stage startups have already hired their core group of early employees. These are probably the most talented people the founders knew from their networks. And everyone knows how important the early people are for building great things and setting the culture of a company.

                                                  A players hire A players and 
                                                    B players hire C players and 
                                                    and C players hire losers. 

During YC’s very first winter batch in 2006, Excite founder Joe Kraus (now at Google Ventures) gave a talk and one of his points has stuck with me ever since. It’s the idea that as soon as you hire a single mediocre person your startup is in danger of being infested by mediocrity. And mediocre people are really, really bad for a startup, so you want to prevent this from happening as long as possible.

Don't be in denial about needing to fire people.

So when you have someone who’s a mediocre performer or is somehow toxic to the work environment, you need to get rid of him/her. STAT. The most common mistake YC dinner speakers say they've made is waiting too long to fire people. It's a mistake practically every founder makes.

Of course you always want to be transparent about performance and give people a chance to meet expectations, but if they aren't, cut them loose. And cut them loose quickly because it's not going to improve. It’s bad for productivity and also for the morale of the team.

No one likes to fire people–especially employees who are nice and trying hard. But you've got to do it. Remember that no one ever hires perfectly. So, once you reach a certain size, if you aren’t firing people, it’s probably because you are in denial. 

You will have to become a manager.

In addition to becoming a recruiter, you'll also have to become a manager. Some founders may think, “I’m a great programmer and have the product vision, but I'm no manager. What should I do as my company grows?” A small percentage of founders may be constitutionally incapable of managing people, but most can learn.  And empirically, management is learnable.

I recently asked a bunch of super successful founders how they learned to manage. I was surprised by how similar their answers were. Their first response was some form of self-deprecating remark like I shouldn’t assume they actually know how to manage or they are still learning on the job. One was a founder of a publicly-traded company!

Some of the techniques they used might seem predictable: they all said they learned by trial and error and by reading lots of books. But the least obvious technique was that they learned from executives they hired. They learned how to manage by watching people they were supposedly managing!

They all shared a certain humility about management. It’s interesting that these are some of the most successful startup CEOs yet they have more humility on this subject than a lot of CEOs of 5-person startups. Learning to manage is a humbling experience.

Another technique that several mentioned was getting together regularly with other CEOs in the same situation to talk about their problems. Maybe two or three other CEOs at the same stage, for example.

The bottom line is that managing feels very foreign to most founders because you go from making stuff yourself to operating through other people. You’ll also have to make tons of decisions about things that are unrelated to the product. I'm sorry to say it will never feel as good as the old days when you were just building stuff and talking to users. 

You may not like managing people, but once a company reaches a certain size you need to start doing this if you want to continue running it. And since it's good for the company if the person with the product vision is also running the company, founders should learn management if they can.

It's way harder to raise subsequent rounds.

Fundraising has changed a lot in the last 10 years. One of the biggest changes is that it has gotten easier to raise a "seed round” but harder to raise subsequent rounds. (I put seed round in quotes because a seed round now can be millions of dollars whereas back in 2005 it was in the hundreds of thousands.) Startups are often unpleasantly surprised by how much tighter the filter is in subsequent rounds. It's unfortunately very common for startups to raise a big chunk of money early on and then labor under the misapprehension that raising another round will be similarly easy.

In the seed round investors are betting on the vision, but in the A round, they need to see results. They want to see rapid growth and they want you to be profitable or able to make it to profitability on the money you have in the bank. We’ve seen many companies get burned by this.

And while you might think the fact that later stage funding depends on traction would make it more straightforward, it doesn’t. Investors are so skittish that even companies with great traction sometimes have a hard time raising money. Plus, investors misbehave just as much in later rounds as early ones.  Some of the dirtiest investor tricks we’ve seen have happened in later rounds of the companies we've funded.

One simple but effective piece of advice for dealing with investors is one I learned from Ron Conway: over-communicate with your investors and confirm things in writing. Even just a 1-sentence email can help like, “Just confirming our conversation that you will invest [this much money] at [this pre-money valuation].”  

And, if you want a good deal, always, always be willing to walk away. Another advantage of being profitable, in addition to making yourself appealing to investors, is that you can walk away from any deal. Which is why when you raise subsequent rounds you should always try to be profitable. In fact, I'd say that unless you are starting SpaceX, you should be profitable when you are raising your second round. 

Don't let yourself run out of runway.

Spend slowly, because the world is unpredictable.

At YC we often see a situation that is, for us, like a horror movie. We get a email from a founder who says they have $600k left in the bank and that they plan to raise an A round and would like our help. We then ask what their monthly burn rate is and they say "$200K." That's 3 month's burn and they expect to raise another round of funding!

It's like a horror movie because we are seeing someone walking toward the bush that we know the monster is hiding behind and there's nothing we can do. Once you start to run out of runway, you are in desperation mode. And if there’s one thing investors can sense, it's desperation. The best case scenario is probably that you'll get money on crappy terms and the worst case is that your desperate situation will make you seem lame and no one will fund you. And don’t take it for granted that your current investors will give you a bridge loan to save your bacon.  Because if you've let things reach this point, you don't deserve one because you’ve mismanaged the company. 

I highly recommend reading Paul Graham's essay, "The Fatal Pinch” to guard against this trap.

Why do founders let the situation get so dire?  A combination of denial and underestimating how much harder it gets to raise later rounds.  They did it before, right?

So how do you guard against the fatal pinch? Keep your expenses low. This seems like such obvious advice, but you'd be surprised at how often we have to give it.

You’ll face unforeseen problems and you can’t predict how long it will take to solve them. And you can't raise money while you’re still trying to solve them. So the more runway you have, the more likely you are to solve these problems before the company dies. 

Don't talk to corp dev.

On the subject of runway, getting acquired also takes longer than you'd imagine and you never want to be in desperation mode when you are talking to acquirers. In fact, in the first year or two, founders should not deal with acquirers, period. 

My advice for founders who are in the earlier phases of their startups: when you get a call from a corp dev person, do not meet with them. Corp dev people may say they just want to explore partnerships, but that is not what corp dev people are in charge of. They buy other companies. And they contact you speculatively, so chances are you won’t even get an offer and you’ll just wind up getting distracted. Although they probably don't consciously think about it, corp dev people are playing games with the strongest emotion a founder can have. 

Don’t tell yourself that a cup of coffee is no big deal and you’re just going to talk about ways to work together. Thank them politely and say you'd like to keep in touch, but right now you are too busy to meet.

I could write a lot on this subject and explain how these painful episodes play out because they are all too predictable. But basically it goes like this: one meeting is enough to get the idea into your head that getting bought is a possibility. Once you let yourself think about the possibility of getting a big chunk of money and not bearing the burden of running a company anymore, you may start to lean toward selling.

Once this happens in your mind, you have no leverage and that's when they turn the screws on you. If you get an offer at all, you’ll probably end up agreeing to a much lower price than you'd ever imagined. Much of that price will be tied up in some backloaded compensation structure where you’re required to work at the big company for the next 4 years. By the way, most founders I know who get acquired or acqui-hired end up leaving well before their time is up. My advice is to assume that you'll never see any money except the part you get up front.

M&A can also be dangerous for later stage companies. Even if you can get a good financial deal, don't be under the illusion that your acquisition will be one of those rare ones where you will go along working independently from the acquirer yet benefitting from its resources, brand and distribution channels. You have to assume that the acquirer will screw up everything.

Sorry if I sound jaded, but you need to assume the worst when dealing with M&A. I recommend reading Justin Kan's "Founder's Guide to Selling Your Company"—it's a very good overview of what to expect. And Paul Graham's "Don’t Talk to Corp Dev". 

The more successful you become, the more haters you'll have.

An unfortunate by-product of success is a greater amount of public criticism. Once you make it to the mid-stage, you may start to become well known, especially if you have a consumer product. Two things can happen at this point with the public that always catch founders by surprise: first, complete strangers will start to assign bad intentions to everything you do. Second, the media will only be interested in one thing about you: controversy. Because controversy equals page views. No actual controversy? No problem; they'll manufacture some.

You can't prevent yourself from being a target. It's an automatic consequence of being successful. So the best you can do is react in the right way when people attack you. To some extent you have to resign yourself to letting people lie about you. You can't engage with every crazy hater or troll. But sometimes you do need to react, especially if something happens that makes more people angry at you than usual. So someone should be watching Twitter, but perhaps not the CEO.

And be very careful about what you say, both as a company and as individuals, even in what might seem like private conversations. Anything you say can turn into a news story nowadays. And you don’t even have to have said something bad–just something someone could willfully misinterpret.

It sucks, but you can't ignore it. The more successful you become, the more you'll need to live your life as though anything you say or do will be willfully misinterpreted.

Ship great things.

I've described some things not to do. I'll end by telling you something that you should do. Keep delighting users by making amazing stuff.  That's probably what got you this far. Hold onto that idea. That will not only get you through the mid-stage. It keeps working forever.  That's how Apple got to be so big. Forty years later they're still trying to delight users by making amazing stuff.

In some respects, like becoming a manager or watching everything you say, you need to change as your company grows. But don’t change this. Don't let anything distract you from shipping great things.

The Social Radar: What I Did at Y Combinator

Culture matters for startups. For a startup to succeed, it must have a culture that reflects what it wants to achieve. This is one of my areas of expertise. I've spent the past decade focusing on Y Combinator's culture. Here I'm going to tell you what I did and what I learned.

People and culture have played an important role at Y Combinator from the very beginning. And I was the one responsible for these things from the very beginning.  Most people don't know this–both because I prefer to operate in the background and because culture is not as visible to the outside world as what a company does functionally.

"Softer" stuff like values, culture and community is often ignored by the press, and more dangerously it's also sometimes ignored by founders. Maybe that's because it doesn't seem exciting, or it's too touchy-feely, or it can't be measured. Or maybe when you're trying to solve a technical problem that's never been solved before, company culture seems a secondary consideration.

But company culture starts when it's just two people working on an idea at the kitchen table. In my experience, the founders who start to care about their culture the soonest also tend to be the ones who build the best companies. In fact, the reason YC has deliberately never offered office space to founders is precisely because of this insight: the founders of individual startups drive the culture from a very early stage and this culture needs to grow organically in the startup's own space.

Here I'm going to explain some things about the origins of Y Combinator's own culture that I've never really shared before. One of the reasons I've never talked about this is that YC's culture was largely my creation and I didn't want to seem to be bragging. But if you understand my story, you'll understand what Y Combinator really is. Y Combinator is two things: it's a new structure of investment firm, but it's also a collection of people, both founders and partners. That collection of people has largely been curated by me over the last decade.

My cofounders Paul, Robert and Trevor are amazing at judging technical ideas, but as they'd be the first to admit, they're not as good judges of character. That's my department. For some reason I've always been a good judge of character–even as a little kid. So during the history of YC, for the most part they judged the ideas, and I judged the people. My cofounders called me "the social radar" for what seemed to them my uncanny ability to see through fakers and sociopaths. But it has historically been very important in making YC what it is.


The last step in YC's funding decisions is an in-person interview with YC partners. Now we have 5 interview tracks, so I only see about 20% of the applicants. But for the first 6 years we had a single interview track, and I was always part of it. In fact my cofounders respected my opinions about character so much that it would not be far off to say that I had a veto over funding decisions.

Most of the people we interviewed didn't realize that, because I don't usually say much during interviews.  What I do during interviews is watch. The typical interview consisted of my cofounders peppering the applicants with technical questions, while I watched how they responded. Most applicants barely realized I was there. But after they walked out, my partners would usually turn to me to get my read on the applicants as people.

I didn't always understand the details of the questions they'd been asked and to this day I can't tell you about operating systems or distributed databases, but I can tell things like when people are BSing, how tough they are, if they get along, and surprisingly often, considering I only have 10 minutes to observe them, whether they're good people or not.

As I said, Paul, Robert and Trevor are really good at technical stuff, but it's precisely because they're so good that they often misjudged founders as people. They'd get excited talking to the applicants about all the things they could do, and afterward think the interview went well, when sometimes all the applicants did was reflect their own ideas back at them. But it was second nature to me to notice these things. 

It's obvious why we'd want to fund founders who are knowledgeable and determined.  But I also found myself filtering for character. This was not a deliberate decision. I just have a very intense reaction to people I think have bad characters. 

Before Y Combinator, character had not traditionally been an important factor for investors.  Investors have often funded people who were jerks but who seemed likely to succeed. But I couldn't do it. YC is not just an investment firm. It's like a family in that we're inviting these people into our place to have dinner every week.

But while this innovation was unintentional, or at least involuntary, it turned out to be super valuable for Y Combinator. As YC has grown, an increasing amount of the value is in the alumni network. Now there are over 2000 alumni. And the fact that we've filtered out most of the bad people means that they're almost all nurturing and trustworthy when newly funded YC companies approach them. Starting a startup has traditionally been a lonely business. Imagine what it means for there to be literally 2000 people who'll come to your aid if asked.

We continue to filter for character even now when we have 5 interview tracks, because now this has become part of YC's culture. And while we have of course made some mistakes, for the most part when you meet a YC founder, you're meeting someone you can trust. They say that institutions are the shadows of the founders, and that aspect of YC is part of my shadow.


Another area where I had a big effect is the atmosphere at Y Combinator. Before YC, atmosphere was not something investment firms even had. They just had portfolios.  But YC was different because after selecting founders we brought them together for dinner every week.

There is a very distinct atmosphere at Y Combinator dinners. If I had to put it into words I'd use words like cheery, collegial, supportive, energizing. But it's one of those things that's so remarkable it's hard to put into words. Stripe founder Patrick Collison once said that one of the best things about YC was:

the buzz of walking into Y Combinator on Tuesday evening, and the general energy/excitement of the founders. That's what comes to mind for me when I think of YC, and it's what I describe to others when they ask why they should do YC.

The atmosphere at YC dinners today is the direct descendant of the atmosphere at the very first dinners we held, back in the summer of 2005. There were only 8 companies then. I did the grocery shopping and Paul did all the cooking, and our first headquarters was in a building Paul owned and had been using as his office, so it felt as if we were inviting people over to our house each week. We had a fireplace at the office and I'd sometimes build a fire. I'd also splurge on fancy cheeses from a nearby gourmet cheese shop. It was basically a dinner party for friends.

This feeling has inevitably been diluted as Y Combinator has grown. There are 116 startups in the current YC batch, and YC now has its own 12,000 square-foot building, so it can't feel quite as much as if founders are coming over to our house for dinner. But it still feels a lot more intimate than you would imagine an event for 116 companies could ever be.

One of the reasons it still feels like home is that the same architect who made our first headquarters has done every space since: Kate Courteau. She's part of the family and she knows we want to keep that family feeling. It's amazing what's she's been able to achieve. You walk into our new building and it simultaneously feels magnificent and homey.

Paul once wrote an essay called "Do Things that Don't Scale." The idea is that even if you want to be big, when you're small you should give your customers a level of attention you can only give them when you're small. This will set your standards for customer service very high, and you'll be able to maintain those standards better than you'd expect as you grow.

We followed our own advice at YC, and one of the most important things we did that didn't scale was to treat the founders as if they were family. It was easy to do that during the first batch. There were so few founders. Plus in the beginning the founders were mostly young, because they were the only ones who'd apply to something like YC. So we literally felt like their parents. I knew where everyone was from, what was going on in their lives, and worried about stuff like whether they were getting enough vitamins in their diet.

Perhaps even more importantly, we did not expect those startups to make money. YC has been so successful since then that it's hard for people to realize, but the first batch of startups we funded was just for us to learn how to be investors. We quickly realized that funding startups in batches was a great idea and that we should do all our investing that way, but the first batch was just an experiment that we expected to lose money on. And since we thought of that first batch as a sort of nonprofit social project, it affected the way we acted toward the founders. It was natural for us when advising companies just to ask "what's best for the founders?" Even our original investment paperwork was novel in how founder-friendly the terms were. We didn't ask for the sort of special powers investors usually ask for, and still don't.

This is one of those counterintuitive things about startups, but one of the keys to being successful is not to be too immediately driven by money. Mark Zuckerberg is a good example. If he'd been driven by money, he'd have taken Yahoo's billion dollar acquisition offer back in 2006, and you would probably not even recognize his name.

After we saw how much it helped founders to have colleagues, we decided to do all our investing in batches. And gradually we started to have hopes that YC would make money. But by this time the idea of treating founders like family and putting their interests first had become part of YC's culture. And while it's harder to make 116 startups feel like family than 8, there's still a lot of that feeling.

It might seem impossible for a group of over 2000 alumni to feel like family, but you'd be surprised at how much it does. And while this will inevitably seem corny, to the extent it does feel like a family, I'm its mom.


Y Combinator doesn't end after Demo Day. The dinners end then, but we continue helping the startups for years after that.  We still give advice to startups we funded 5 or even 8 years ago.

Startups need different types of advice. Sometimes they're trying to figure out what to build, or how to grow. Other times they're dealing with more personal problems like whether to take an acquisition offer or whether they should fire an employee who isn't working out. Those are the questions I tend to give advice about. Being the "social radar" helps me get to the root of problems within startups just as it helps me to evaluate founders during interviews.

Let me tell you something about startups. If you've ever started or worked for one, you're probably familiar with this phenomenon, but many people who haven't are surprised by it. Most startups, behind the scenes, are shitshows. Even the most successful ones. They mostly conceal this from the outside world, because they're trying to seem legit so they can get customers. But there are always disasters happening. I'd say around 10% of startups have life-threatening cofounder disputes, for example.

So though this tends to be concealed from the world, the sort of problems I help founders with are probably both more common and more dangerous than technical ones.

On top of my "social radar," I now have experience dealing with literally hundreds of startups. So now when I see a problem I've usually seen the same problem ten times before. It must seem to founders that I'm a mind-reader, but what's really happening is that their problems are less unique than they think.

One of the most important things I know is how much to worry. Having dealt with hundreds of startups, I can look at a problem and tell founders immediately either "Don't worry, these are typical growing pains," or "you are now operating in failure mode and I have no hope for the company." And I think people trust that I'm not going to judge them the way some of their other investors might; they know I just want to help.

Beyond giving practical advice, though, I think it helps founders just to have someone they can talk to. All people need someone to talk to, and early on, companies are people.


Though we can't fund every startup, we do make an effort to open-source as much as we can of what we do for the companies we fund.

For example, we try to host events that share the same kind of information that's shared at YC. And we are one of the few organizations that has always done the events for free, since we know startup founders don't often have a lot of money to spend on conferences.

Now there is a group of us who work on events, but in the beginning I used to do these events singlehandedly. And we were remarkably ambitious about them.  We did our first Startup School in the fall of 2005, when YC was only 6 months old and our portfolio consisted of 8 companies.

In addition to events, we've created and open-sourced several types of investment documents, like the safe, to make it easier and less expensive for startups to get funding.

Paul Graham has written lots of essays on helpful subjects for startups–many of which originated from advice he gave at YC. Sam Altman now writes a ton of great stuff, too. And Kat Manalac and I launched the Female Founder Stories site as a way to inspire and educate women about startups.

We can't advise or meet with everyone, but we have always had a philosophy of sharing as much of what YC does with the world as we can.

This is far from a complete list of the things I've worked on for the past 10 years, but you can see there's a lot to culture.  Culture is not just a mission statement.  It's which people you have in your organization, how you act within it, and even how you act to the outside world. And I can tell you from my own experience how important culture is.  When outsiders talk about YC, they talk about its novel structure. But that's only half of what YC is. The other half is our people and culture. That's what I've focused on for the last decade, and that's the half of YC that no one else has been able to duplicate.

(This post was derived from the talk I gave at Y Combinator's Female Founders Conference in 2015.)