Grow the Puzzle Around You

In 2005, I cofounded Y Combinator, the first "accelerator." Today there are hundreds of them all over the world, but in 2005 what we were doing was so unusual that most people in Silicon Valley regarded us as irrelevant.

Y Combinator began the same way as most other startups: with a hypothesis about something we thought people wanted. It turned out they did want it, and we grew and grew. Now we've funded 1867 startups with a total value of over $100 billion.

So having myself been through the type of startup journey that many of you are hoping to, I wanted to tell you my own story.

If you only know about me through the media, you might get the impression that my contribution to Y Combinator is that I’m Paul Graham’s wife. And while I love being his wife, there's a bit more to the story than that.

I was born in Minneapolis in 1971. Later that year, my mother left home, leaving my father alone with a small baby. So he took me back to Boston, where my grandmother lived.  I lived with her during the week while my dad worked, and with my dad on weekends.

My grandmother was the most important female role model in my life. She was a very independent person. The term anyone who knew her would use to describe her was "free-spirited." For example, in the wintertime, after putting me to bed, she'd go out and work till late at night on giant ice sculptures she built in the front yard.

She did what she wanted, and she didn't care if people thought she was unconventional.

Despite growing up without a mother, my childhood was pretty happy. My dad made a lot of sacrifices so I could get a great education, and he constantly encouraged me.

I played soccer when I was younger, and when I was in 9th grade we played an away game against a school called Phillips Academy, in Andover, MA.  The place seemed so unbelievably fabulous that I decided on the spot that I was going to go to school there.

Little did I know that this decision would have bittersweet consequences. In my old school I'd been a big fish in a small pond. I was a straight A student and good at sports.  But when I got to Andover in the fall of 1986, it seemed like everyone was a straight A student and good at sports. I got really discouraged and basically gave up.

I defaulted to being a mediocre student, and did nothing impressive or noteworthy for the next decade. They were like my own personal Dark Ages.

It’s a bit embarrassing to reflect on, but I think it’s important to mention, because when journalists and biographers write about successful founders, they often focus on early predictors of success in their formative years. In my case there certainly weren't a lot of the conventional kind. No one would have voted me "most likely to succeed."

But while I had no "achievements," I did have three defining characteristics when I was younger that were critical in making Y Combinator work.

The first was the quality that caused my YC cofounders to nickname me "The Social Radar." I was one of those kids that you just couldn’t get anything past. If something seemed off or out of character, I noticed and made inquiries. I was always trying to figure things out based on subtle social cues.

The second was that I never liked being at the mercy of anyone else. I hated anyone telling me what to do or not do: parents, teachers, bosses, people I was forced to collaborate with but disagreed with—anyone.

And the third distinctive thing about me is that I've always pretty much been a "straight shooter." My grandmother and my father were both like that.

But I’ll come back to these in a minute.

The day after I graduated from college, my beloved grandmother died of cancer. It was a really sad and lonely time in my life. And now I was supposed to find a job, with a degree in English and absolutely no clue what I wanted to do. 

I wound up getting a job at Fidelity Investments in their customer service group, answering calls from 3:30 til midnight each day. Basically talking to retail investors about why their Magellan account went down that day. Ugh. I didn’t love the job but I did love having a job. Working hard and getting paid for it and not having homework hanging over my head. It was great. After Fidelity I worked in investor relations in NYC, then at Food & Wine magazine and at an automotive consulting firm. I even briefly worked for a wedding planner.

In 2003, I was working in the marketing department at an investment bank in Boston when I first met Paul Graham, at a party at his house one night.

We started dating and I felt like I’d finally met Mr. Right. Despite having quite different backgrounds, we were remarkably similar.  If I thought I never wanted to be at the mercy of someone else, Paul was that dialed up to 11.

He’d moved back to Cambridge after selling his startup, Viaweb, to Yahoo and was at the time writing essays, working on programming languages, publishing a book, and curing his debilitating fear of flying by learning to hang glide.

Paul is the best problem solver I've ever met. He’s also a genius at expanding ideas and making radical improvements to things. One of his defining characteristics is telling people "You know what you should do..."

Paul and his circle of friends exposed me to this new world of startups. It felt much more exciting than the later stage of publicly-traded tech companies that I was involved with at the investment bank. I read the book Startup by Jerry Kaplan, about his pen computing company called GO, and I was immediately hooked. It was like some light shining down from the heavens.

I wanted to hear more stories about the early days of startups, so I started working on a book of interviews with startup founders. The book was called Founders at Work, and was published in 2007.

At the same time I was becoming more interested in startups, I was becoming less interested in my job. The Bubble had burst a few years back and the investment bank was making drastic cutbacks. Working there had become boring and unpleasant.

So I applied for a job doing marketing at a venture capital firm, where I felt I might be one step closer to the more exciting world of startups. While I was interviewing with the VC firm, Paul would “you-know-what-you-should-do” me each night at dinner, telling me how I  should change the VC business once I got into it.  We’d talk for hours about how broken early-stage startup funding was, and most importantly, how more people would start startups if it could be made easier for them.

As the VC firm took longer and longer to decide to hire me, the ideas grew more and more compelling until one night Paul said, "Let's just start our own." The next day we convinced Paul's cofounders from Viaweb, Robert and Trevor, to join us part-time. The initial plan was that they would pick and advise the startups and I’d do everything else.

Instead of giving large amounts of money to small numbers of established startups, like traditional VCs did, we'd give small amounts of money to large numbers of earlier stage startups, and then give them a lot of help.

Our initial target audience was programmers, who we felt could handle the technical aspects of a startup but were clueless about everything else, just like Paul, Robert and Trevor had been.

We also had more faith in young founders than most investors did back then.  This was back in the days when Google’s VCs had insisted the founders hire an outside CEO as a condition of their series A round.

None of us had any experience at angel investing, and that's where the idea of funding startups in batches came from. We decided to fund a bunch of startups at once, during the summer, so that we could learn how to be investors.  In March 2005 we launched Y Combinator’s website, inviting people to apply for what we called "The Summer Founders Program."

We funded 8 startups that summer and recognized almost immediately the power of investing in batches. It was so much better for the founders. They had colleagues to help them during what had previously been a very lonely process. But it was also a much more efficient way for us to help the startups, because we could do things for them all at once. Every Tuesday Paul cooked dinner for all the founders, and at each dinner we brought in a speaker to teach them about startups.

Paul talked to all the startups about what they were building, and I helped them all get incorporated as C corporations.  This was a big deal in those days, because back then to become a C corp you had to pay a lawyer $15,000 to do it for you.

The first summer, we gave the startups $6k per founder, which was based on the stipend that MIT gave grad students during the summer. At the end of the summer, we hosted the first Demo Day, for an audience of about 15 investors.  Reddit was in that first batch, and the founders of Twitch, though they were working on another idea, and Sam Altman’s geolocation startup.

Though we'd only tried funding a batch of startups as a way to learn how to be investors, we realized within a couple weeks that we were onto something promising. So we decided to do all our investing in batches. And we also decided that we'd fund the next batch in Silicon Valley.  We knew that a lot of people would copy us, and we didn't want someone else to be "the Y Combinator of Silicon Valley." We wanted to be that ourselves.

Despite the fact that we’ve grown significantly and have expanded in many ways, YC’s core program is remarkably similar to what it was 13 years ago.

The question I always used to get from people over the years was, "So, what's your role at YC?" It used to really bug me because no one ever asked Paul, Robert, or Trevor that question.  But now I think it’s kind of an interesting question to think about.  What was my role as the only non-technical founder of Y Combinator?

At the beginning there were tons of errands, like with any startup, that just had to get done and there was no one else to do them. Paul and I divided up responsibilities perfectly, which I think is critical when you start a startup with your partner or spouse. He made our website and the application form, and I got other stuff set up for that first summer: I worked with the lawyers to set up Y Combinator the entity and to create all kinds of template legal paperwork for our standard investments and everything founders would need to set up their company and assign stock properly (which is a lot if you’ve ever done it!).  

I also had to learn quickly about how to advise them on filling everything out, so they wouldn’t have to pay any legal fees. I had to set up Paul’s small office building in Cambridge to be our weekly dinner gathering space for 25 people. I set up our bank account and contacted people to speak each week at our dinners. I bought the groceries that Paul cooked for the dinners. I even delivered air conditioners that I’d bought at Home Depot to the founders. I was the only one of us organized enough to make all that stuff happen.

When it came to investing, I had something that my cofounders didn’t have: I was the Social Radar. I couldn’t judge our applicants’ technical ability, or even most of the ideas. My cofounders were experts at those things.  I looked at qualities of the applicants my cofounders couldn't see.  Did they seem earnest? Were they determined? Were they flexible-minded?  And most importantly, what was the relationship between the cofounders like? While my partners discussed the idea with the applicants, I usually sat observing silently. Afterward, they would turn to me and ask, "Should we fund them?"

From the beginning I was careful about only funding earnest people. Back then, I never envisioned the people we funded growing into a community of thousands of YC alumni, but I always tried to create an asshole-free culture. If I could tell someone was a conceited asshole, we didn’t fund them. I’m sure we’ve since funded some conceited assholes, but early on I was pretty rigid about this. And I think it’s the basis of the culture of our alumni community.

So far this stuff might sound a bit different than you’d expect in a successful investor. But when you get to an extreme in something, things get qualitatively different. Y Combinator was a new extreme in the venture funding business, so what made someone a good investor was different. VCs relied on growth figures and estimates of market sizes, but those didn't exist at the stage we were investing. What YC needed was deeply technical people to understand the potential of an idea, and someone like me to understand the founders' characters and the relationship between them.  And to do that well you needed abilities no one had previously considered important in an investor.

It was doubly hard because some of the applicants were so young. We had to judge the founders not by what they were, but what they could turn into. Imagine Mark Zuckerberg back in his dorm room in 2004, with a website that let college students see what other students at their school were doing. Not super impressive-seeming to traditional investors.

Another secret weapon of mine that was strangely well-suited to Y Combinator was that I was a very experienced event planner.  Events are a critical part of what YC does. When you fund startups in batches, everything’s an event. Interviews are an event, each dinner is an event, Demo Day is an event.  As the alumni network grew we started doing events for alumni too, and from the very first year we did big events like Startup School.  I’d been doing events for years in my marketing jobs, so I could run all these practically with one hand behind my back.

Probably the thing that was most different about YC as an investment firm was that it felt like a family.  And I was its mom; I was soft and sensitive at a time when investors tended to be hardened and aggressive (and I’ll throw in ruthless too for a few of them). I cared about how the founders were feeling, if they were overwhelmed, if they were eating properly. I’d counsel them on relationships that were under strain due to the pressure of the startup. I’d listen at length and help them with their cofounder disputes and breakups.

Starting a startup is emotionally draining for founders, especially in the beginning.  Sometimes they just needed someone to listen. Luckily, my entire college career had trained me to be a good listener to people’s social problems.

And I tried to always be a straight shooter with my advice. In fact, we all were. Paul is the straightest shooter I know, which is why his advice is so valuable. He doesn’t bury it in euphemisms.  Or worse, withhold the truth in order to preserve people's feelings. And as tough as they might have found his advice at the time, founders always wind up thanking him for his candor.

One other thing Paul and I had in common was that we weren't driven by money. We were interested in startups and we wanted to help people start more of them. This was the basis for everything we did at YC. It was what allowed us to do something as weird as YC in the first place.

Because YC didn't have any LPs early on, we weren’t even constrained by a vague fiduciary responsibility to anyone. This allowed us to take more risks with which startups we chose to fund and also allowed us to be benevolent to failing startups.

That often brought us into conflict with other investors who had different priorities.  Early on, we funded a husband and wife team who had a baby. They worked hard on the startup but it was clearly failing. One of their investors tried to get them acquihired by a big company in the Valley, who ultimately passed.

Paul talked to the founders and learned they just wanted the security of jobs, so they could take a break from the constant stress of a startup. So he talked to the big company and got one of them hired there.  The founders were delighted. The investor, on the other hand, was livid. He ripped into Paul harder than almost anyone I’ve ever witnessed (well, before Twitter) saying that Paul had blown any chance of an acquihire. I still don't get why investors squeeze founders even over small outcomes like this. 

I also never cared much about fame. Or my personal "brand". I just wanted Y Combinator to succeed.

One thing we've learned from Y Combinator is that the most successful startups tend to grow organically out of the founders' lives. This was true in my case too. I was almost uncannily well suited for the kind of work it took to make YC successful. But the things that made me well-suited for it were so far from the qualities most people associate with startup founders. I'll list them so you can see for yourself. I was the social radar, a good event planner, maternal, empathetic, a straight shooter, and not driven by money or fame.  Think how far that is from the profile of the typical startup founder you read about in the press. Maternal? Since when was that an important quality in a startup founder? Let alone the founder of an investment firm. And yet it was critical to making YC what it is.

That's why I wanted to tell you my story. It's not true that every person can start every startup. But a lot more people have what it takes to start some startup than realize it. A lot of people, perhaps all people, have some distinctive combination of abilities and interests. And a lot of those combinations match some startup idea.

So if you want to start a startup, I recommend you try asking yourself what's distinctive about you. What unique combination of abilities and interests do you have?  And don't edit your answers, because as my example shows, the most unlikely ingredients could be the key to the recipe.

In fact, it may even be that the strangest combinations of qualities are the most valuable.  I had a weird combination of qualities, but they matched YC because it was such a weird company. And the most successful startups do tend to be weird. They're usually such outliers that the idea sounds preposterous at first. To everyone except the founders, because the company has grown out of their experiences.

So what can you learn from my story? Here are 9 things:

1) There is no one mold for a successful founder.  Just because you might only see a certain type in the news, that doesn’t mean you need to turn yourself into that.

2) Do what you’re genuinely interested in and try to play to your natural strengths. A startup is so much work that you'll give up if you're not genuinely interested in it.

3) Don’t pay attention to the mainstream’s opinion of what you're doing—whether it’s your skills, your idea or whatever.  Unless they’re your users, their opinion does not matter. (Pay a lot of attention to your users' opinions though!)

4) Find a cofounder with complementary skills, but the same moral compass as you. Paul and I had the perfect combination of skills to start something like YC. We agreed on all the big questions, and we each deferred to the other's expertise on the small ones.

5) Focus on making something people want. Everything follows from that. In 2005, people needed a way to get a small amount of funding easily.

6) Don’t let rejection distract you or hold you back. You’ll get rejected in so many different ways, but you must keep moving forward.

7) Start small so you can be nimble and open to change. We never could have pulled off moving our operations to Silicon Valley in a matter of months if we'd hired a bunch of people in Cambridge.  To this day, YC has a tradition of trying things on a small scale before expanding them.

8) It’s ok not to have gone to an elite college. I grew up thinking that that was the be-all and end-all. You’ve been trained to believe that you’ll be judged by your credentials. But in a startup it's the users who judge you, and they care about your product, not your credentials.

9) Be intrepid. There's room for lots of different kinds of people to be startup founders, but you do need a certain amount of boldness—to work on ideas that most people would consider stupid, and to keep going when you're ridiculed or ignored.

You are a jigsaw puzzle piece of a certain shape. You could change your shape to fit an existing hole in the world. That was the traditional plan. But there's another way that can often be better for you and for the world: to grow a new puzzle around you.  That's what I did, and I was a pretty weird-shaped piece. So if I can do it, there’s more hope for you than you probably realize.

Think about Equity

When I was younger I thought the way to get money was by working for a salary. If you wanted to get a lot of money, you did it by getting a high salary.

That’s still the way most people make money, and probably even the way most people make a lot of money.

But there’s another way to make money that I didn't know about when I was young, and that's becoming increasingly common. It's called equity. Equity is especially common as a way to make large amounts of money. A lot of people who get rich these days do it via equity, not salary.

I usually write for an audience of potential or actual startup founders. They understand what equity is, at least compared to the general public. But this post is not for startup founders. Here, I want to introduce the idea of equity to people like I was in my 20s—to the people who don't consciously realize there’s another way to make money besides salary.

Equity means stock. In addition to salary, some jobs also give you a slice of the company you work for.

If someone had told 25-year-old me about that, my reaction would have been, "Can you do that?" And the answer is, usually not. If you go to work for a big established company, they won't give you part of it. And if you go to work for Joe's Diner, Joe won't either.

On the other hand, if you start your own company, you can obviously have part of it. This is how the very richest people—the Zuckerbergs and the Bezoses—make money from equity. They own part of the company they started, and as the company grows in value, their fortune does too.

It used to be extremely rare for people to start companies that grew big. It has always been common for people to start companies that start small and stay small—hair salons, cafes, and so on. What’s changed in the last few decades is that it's increasingly possible for individuals to start companies that start small and grow big. And I don't mean just Facebooks and Amazons. There are thousands of companies smaller than Facebook and Amazon that have made their founders rich.

Starting a startup has gone from extremely rare to just rare. It will probably never be more than that. Starting a startup is very hard. It’s definitely not for everyone.

But you don't have to start a startup to get equity in it. Startups give their employees equity, too. How much equity you get in a company depends on how early you join it. The fifth employee will get much more than the hundredth.

On the other hand, the hundredth employee is taking less risk than the fifth. By the time a startup has a hundred employees, you have a better idea of its chances for success than when it has just five.

So making money from startup equity is not an all or nothing thing. You can go for a large amount of very risky stock (and a large amount of work) by starting the company, or a smaller amount of less risky stock by joining it later.

And now we're in territory that matters to a lot of people. Founding a startup is not for everyone, but anyone who’s reasonably smart and willing to work sufficiently hard can be an early employee of one.

I was one of those people. When I was 25, I worked as hard as people work at startups, and all I got for it was salary and a small bonus. If I'd known about equity, I would have seriously considered trying to work for a company where I'd get some.

Once you start looking at the world from the point of view of equity rather than just salary, everything changes. Deciding where to work becomes a lot harder. If you're only working for salary, you know exactly how much you'll be making. But startup equity is only valuable if the company succeeds. How can you tell if a startup is going to succeed? The truth is, it's not easy.  It's investors' full time job to try to predict that, and even they have a hard time doing it well.

But it's not impossible for potential employees to predict how well a startup will do. People in Silicon Valley, where startups are common, have several tricks for doing it. In some ways they have an advantage over investors. For example, one way to predict how well a startup will do is to be one of their users. There were thousands of undergrads who knew Facebook was a big deal before any investor did. And many of them made a lot of money from equity by going to work for it.

Another way to predict which startups will succeed is to look at where your peers are going.  Have several of the smartest people in your graduating class ended up at the same startup? That's probably a company worth investigating.

I'm not going to try to explain all the techniques you can use to predict how well a startup will do. My point is just that such techniques do exist. You're not just flipping a coin. If you work hard at figuring out where to work, you can do a lot better than random.

I don't want to give you the impression that going to work for a startup is guaranteed to make you rich. Far from it. Most startups fail. So you should never consider equity in a startup as more than a bet that might turn out well. On the other hand, it's a bet that you can make fairly cleverly, if you work at it, and when it turns out well, it can turn out very, very well.

So the world has now, I hope, gotten more complicated. You now know there's another way to make money besides salary. You can get it by starting a startup or by going to work for one. And deciding which startup to work for is not like deciding what big company to work for, where you go for the big names, because the equity with the most upside is that of startups so small that most people have never heard of them.

There are a lot of new things to think about here. Thinking about them will be worthwhile.

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.