October 2006In the Q & A period after a recent talk, someone asked whatmade startups fail. After standing there gaping for a fewseconds I realized this was kind of a trick question. It'sequivalent to asking how to make a startup succeed—if youavoid every cause of failure, you succeed—and that's too biga question to answer on the fly.Afterwards I realized it could be helpful to look at theproblem from this direction. If you have a list of all thethings you shouldn't do, you can turn that into a recipe forsucceeding just by negating. And this form of list may bemore useful in practice. It's easier to catch yourself doingsomething you shouldn't than always to remember to dosomething you should.[1] In a sense there's just one mistake that kills startups: notmaking something users want. If you make something userswant, you'll probably be fine, whatever else you do or don'tdo. And if you don't make something users want, thenyou're dead, whatever else you do or don't do. So really thisis a list of 18 things that cause startups not to makesomething users want. Nearly all failure funnels throughthat.
1. Single Founder
Have you ever noticed how few successful startups werefounded by just one person? Even companies you think of ashaving one founder, like Oracle, usually turn out to havemore. It seems unlikely this is a coincidence.What's wrong with having one founder? To start with, it's avote of no confidence. It probably means the foundercouldn't talk any of his friends into starting the companywith him. That's pretty alarming, because his friends are theones who know him best.But even if the founder's friends were all wrong and thecompany is a good bet, he's still at a disadvantage. Startinga startup is too hard for one person. Even if you could do allthe work yourself, you need colleagues to brainstorm with,to talk you out of stupid decisions, and to cheer you upwhen things go wrong.
Oct 18:
Deadline for next YCfundinground.
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The last one might be the most important. The low points ina startup are so low that few could bear them alone. Whenyou have multiple founders, esprit de corps binds themtogether in a way that seems to violate conservation laws.Each thinks "I can't let my friends down." This is one of themost powerful forces in human nature, and it's missingwhen there's just one founder.
2. Bad Location
Startups prosper in some places and not others. SiliconValley dominates, then Boston, then Seattle, Austin,Denver, and New York. After that there's not much. Even inNew York the number of startups per capita is probably a20th of what it is in Silicon Valley. In towns like Houston andChicago and Detroit it's too small to measure.Why is the falloff so sharp? Probably for the same reason itis in other industries. What's the sixth largest fashion centerin the US? The sixth largest center for oil, or finance, orpublishing? Whatever they are they're probably so far fromthe top that it would be misleading even to call themcenters.It's an interesting question why citiesbecomestartup hubs,but the reason startups prosper in them is probably thesame as it is for any industry: that's where the experts are.Standards are higher; people are more sympathetic to whatyou're doing; the kind of people you want to hire want tolive there; supporting industries are there; the people yourun into in chance meetings are in the same business. Whoknows exactly how these factors combine to boost startupsin Silicon Valley and squish them in Detroit, but it's clearthey do from the number of startups per capita in each.
3. Marginal Niche
Most of the groups that apply to Y Combinator suffer from acommon problem: choosing a small, obscure niche in thehope of avoiding competition.If you watch little kids playing sports, you notice that belowa certain age they're afraid of the ball. When the ball comesnear them their instinct is to avoid it. I didn't make a lot of catches as an eight year old outfielder, because whenever afly ball came my way, I used to close my eyes and hold myglove up more for protection than in the hope of catching it.Choosing a marginal project is the startup equivalent of myeight year old strategy for dealing with fly balls. If you makeanything good, you're going to have competitors, so youmay as well face that. You can only avoid competition byavoiding good ideas.I think this shrinking from big problems is mostlyunconscious. It's not that people think of grand ideas but
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decide to pursue smaller ones because they seem safer.Your unconscious won't even let you think of grand ideas.So the solution may be to think about ideas withoutinvolving yourself. What would be a great idea for
someoneelse
to do as a startup?
4. Derivative Idea
Many of the applications we get are imitations of someexisting company. That's one source of ideas, but not thebest. If you look at the origins of successful startups, fewwere started in imitation of some other startup. Where didthey get their ideas? Usually from some specific, unsolvedproblem the founders identified.Our startup made software for making online stores. Whenwe started it, there wasn't any; the few sites you couldorder from were hand-made at great expense by webconsultants. We knew that if online shopping ever took off,these sites would have to be generated by software, so wewrote some. Pretty straightforward.It seems like the best problems to solve are ones that affectyou personally. Apple happened because Steve Wozniakwanted a computer, Google because Larry and Sergeycouldn't find stuff online, Hotmail because Sabeer Bhatiaand Jack Smith couldn't exchange email at work.So instead of copying the Facebook, with some variationthat the Facebook rightly ignored, look for ideas from theother direction. Instead of starting from companies andworking back to the problems they solved, look for problemsand imagine the company that might solve them.[2]Whatdo people complain about? What do you wish there was?
5. Obstinacy
In some fields the way to succeed is to have a vision of whatyou want to achieve, and to hold true to it no matter whatsetbacks you encounter. Starting startups is not one of them. The stick-to-your-vision approach works forsomething like winning an Olympic gold medal, where theproblem is well-defined. Startups are more like science,where you need to follow the trail wherever it leads.So don't get too attached to your original plan, because it'sprobably wrong. Most successful startups end up doingsomething different than they originally intended—often sodifferent that it doesn't even seem like the same company.You have to be prepared to see the better idea when itarrives. And the hardest part of that is often discarding yourold idea.But openness to new ideas has to be tuned just right.Switching to a new idea every week will be equally fatal. Isthere some kind of external test you can use? One is to ask
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