Paul Graham: What We Look for in Founders

1. Determination

This has turned out to be the most important quality in startup
founders. We thought when we started Y Combinator that the most
important quality would be intelligence. That’s the myth in the
Valley. And certainly you don’t want founders to be stupid. But
as long as you’re over a certain threshold of intelligence, what
matters most is determination. You’re going to hit a lot of
obstacles. You can’t be the sort of person who gets demoralized
easily.

Bill Clerico and Rich Aberman of WePay
are a good example. They’re
doing a finance startup, which means endless negotiations with big,
bureaucratic companies. When you’re starting a startup that depends
on deals with big companies to exist, it often feels like they’re
trying to ignore you out of existence. But when Bill Clerico starts
calling you, you may as well do what he asks, because he is not
going away.

2. Flexibility

You do not however want the sort of determination implied by phrases
like “don’t give up on your dreams.” The world of startups is so
unpredictable that you need to be able to modify your dreams on the
fly. The best metaphor I’ve found for the combination of determination
and flexibility you need is a running back.
He’s determined to get
downfield, but at any given moment he may need to go sideways or
even backwards to get there.

The current record holder for flexibility may be Daniel Gross of
Greplin. He applied to YC with
some bad ecommerce idea. We told
him we’d fund him if he did something else. He thought for a second,
and said ok. He then went through two more ideas before settling
on Greplin. He’d only been working on it for a couple days when
he presented to investors at Demo Day, but he got a lot of interest.
He always seems to land on his feet.

3. Imagination

Intelligence does matter a lot of course. It seems like the type
that matters most is imagination. It’s not so important to be able
to solve predefined problems quickly as to be able to come up with
surprising new ideas. In the startup world, most good ideas
seem
bad
initially. If they were obviously good, someone would already
be doing them. So you need the kind of intelligence that produces
ideas with just the right level of craziness.

Airbnb is that kind of idea.
In fact, when we funded Airbnb, we
thought it was too crazy. We couldn’t believe large numbers of
people would want to stay in other people’s places. We funded them
because we liked the founders so much. As soon as we heard they’d
been supporting themselves by selling Obama and McCain branded
breakfast cereal, they were in. And it turned out the idea was on
the right side of crazy after all.

4. Naughtiness

Though the most successful founders are usually good people, they
tend to have a piratical gleam in their eye. They’re not Goody
Two-Shoes type good. Morally, they care about getting the big
questions right, but not about observing proprieties. That’s why
I’d use the word naughty rather than evil. They delight in
breaking
rules
, but not rules that matter. This quality may be redundant
though; it may be implied by imagination.

Sam Altman of Loopt
is one of the most successful alumni, so we
asked him what question we could put on the Y Combinator application
that would help us discover more people like him. He said to ask
about a time when they’d hacked something to their advantage—hacked in the sense of beating the system, not breaking into
computers. It has become one of the questions we pay most attention
to when judging applications.

5. Friendship

Empirically it seems to be hard to start a startup with just
one
founder
. Most of the big successes have two or three. And the
relationship between the founders has to be strong. They must
genuinely like one another, and work well together. Startups do
to the relationship between the founders what a dog does to a sock:
if it can be pulled apart, it will be.

Emmett Shear and Justin Kan of Justin.tv
are a good example of close
friends who work well together. They’ve known each other since
second grade. They can practically read one another’s minds. I’m
sure they argue, like all founders, but I have never once sensed
any unresolved tension between them.

Great Startup Lessons by Aaron Patzer, CEO of Mint

Let’s say you have an idea for a startup. How do you begin the process of finding cofounders and employees, creating a corporation, handing investors, growing the company, etc.? 

In this great talk Aaron Patzer – CEO of Mint – gives some great and very practical advice. He talks about the early days of Mint, where he lived on $30,000/yr and hired engineers at just a little more salary by offering them significant equity. He also says that, as a rule of thumb, every engineer in a pre-revenue startup adds $500,000 in valuation. Every business guy lowers the valuation by $250,000. In its earliest days, Mint was burning $150,000/year, he says, for 2 founders and 1 engineer/contractor.

Other topics include: financial modeling, how to keep costs low, and Mint’s revenue model. He also gives suggested goals and milestones for each successive funding round. One interesting fact – today Mint, which is free, generates $30/year/user from various offers and value added services.

If you are a startup founder, you’ll want to bookmark this and refer back to it. Seriously.