The Lesson to Unlearn

January 1, 2020    pg wisdom advice

When I started advising startup founders at Y Combinator, especially young ones, I was puzzled by the way they always seemed to make things overcomplicated. How, they would ask, do you raise money? What’s the trick for making venture capitalists want to invest in you? The best way to make VCs want to invest in you, I would explain, is to actually be a good investment. Even if you could trick VCs into investing in a bad startup, you’d be tricking yourselves too. You’re investing time in the same company you’re asking them to invest money in. If it’s not a good investment, why are you even doing it?

Oh, they’d say, and then after a pause to digest this revelation, they’d ask: What makes a startup a good investment?

So I would explain that what makes a startup promising, not just in the eyes of investors but in fact, is growth. Ideally in revenue, but failing that in usage. What they needed to do was get lots of users.

How does one get lots of users? They had all kinds of ideas about that. They needed to do a big launch that would get them “exposure.” They needed influential people to talk about them. They even knew they needed to launch on a tuesday, because that’s when one gets the most attention.

No, I would explain, that is not how to get lots of users. The way you get lots of users is to make the product really great. Then people will not only use it but recommend it to their friends, so your growth will be exponential once you get it started.

At this point I’ve told the founders something you’d think would be completely obvious: that they should make a good company by making a good product. And yet their reaction would be something like the reaction many physicists must have had when they first heard about the theory of relativity: a mixture of astonishment at its apparent genius, combined with a suspicion that anything so weird couldn’t possibly be right. Ok, they would say, dutifully. And could you introduce us to such-and-such influential person? And remember, we want to launch on Tuesday.

It would sometimes take founders years to grasp these simple lessons. And not because they were lazy or stupid. They just seemed blind to what was right in front of them.