- The speaker introduces Paul Graham, founder of Y Combinator, for a conversation
- They discuss how they met at Yahoo in the late 90s and their involvement in creating Yahoo Mail and Gmail
- Graham talks about his idea for ViaWeb, a web app company that Yahoo bought, which allowed software to run on the server instead of Windows
- They discuss the process of coming up with innovative ideas and how they may seem obvious in retrospect but require a certain mindset and motivation
- Graham emphasizes the importance of picking ideas that seem outrageous or naughty, as they often have the most potential
- He acknowledges that the success of startups is partially determined by luck and that even with perfect selection, it is difficult to predict which startups will succeed
- Graham mentions the value of being a hacker and how laziness can sometimes be helpful in finding innovative solutions
- They joke about the idea of laziness being seen as a positive trait

- The speaker discusses the concept of "laziness" in the context of entrepreneurship, referring to it as a reticence to do unnecessary tasks.
- The speaker shares their experience of finding co-founders for their internet business in 1995.
- They chose Robert Morris and Trevor Blackwell as co-founders based on their programming skills and compatibility.
- Robert Morris had a nonchalant attitude towards the startup and was willing to consider acquisition offers.
- The speaker made a deal with Robert that if he made a million dollars, he would get an earring.
- Robert and Trevor had unique qualities and experiences, such as Robert being a convicted felon and Trevor being exceptionally skilled in programming.
- The speaker shares anecdotes about Robert's rebellious nature and Trevor's productivity.

- Trust is important when choosing employees or co-founders
- Intelligent people can judge other intelligent people, but trustworthy people often cannot judge other trustworthy people
- Networking is not effective for determining trustworthiness
- Startups are counterintuitive and Y Combinator teaches founders counterintuitive lessons
- Doing things that don't scale in the beginning of a startup is important for learning and growth
- Manual processes and personal experiences can lead to improvements in software
- Sole founders face challenges in maintaining morale and overcoming doubts
- Startups either succeed and make the founder rich or fail and die
- Doing things that don't scale is a common topic discussed at Y Combinator.

- The speaker discusses the importance of talking to users and learning in the early stages of a startup
- They mention that poor execution by founders is a common reason for startup failure
- The speaker emphasizes the importance of having a good founding team and a strong bond between team members
- They suggest that determination is more important than intelligence in startup success
- The ability to think and make the right choices is also important, but creativity may not be necessary if the focus is on satisfying users
- The speaker briefly mentions Steve Jobs and his unique approach to product development
- They mention that being nice and friendly is generally preferred in founders, and that Steve Jobs may not have passed the test in this regard.

- The speaker discusses the importance of being nice and friendly in business, but also mentions that determination matters more.
- They emphasize the need to pay attention to users and not just rely on personal vision when building a startup.
- The speaker shares a story about launching a project quickly, highlighting the importance of not waiting too long to launch.
- They mention the challenge of scaling and the need to eventually build software to handle larger volumes of applications.
- The speaker addresses questions about hiring co-founders, dealing with different commitment levels, and firing co-founders.
- They mention the concept of launching in a private beta and discuss the current trend of ICOs (Initial Coin Offerings).
- The speaker cautions against raising too much money and the potential negative effects it can have on a company.

- Tips for a great user interview:
  - Figure out what's actually wrong, not just what they think is wrong.
  - Start by asking what they would like to do or be able to do.
  - Understand the underlying meaning behind their answers.
  - Ask hypothetical questions about what they would do if they could.
- Launch as soon as you have a "quantum of utility" (i.e. when at least one person is glad you launched).
- Building what customers want vs what they need:
  - It's important to build something people will choose to use.
  - Sometimes what people want and what they need are different.
- Founder DNA:
  - Combination of positive traits like determination and willingness to try new things.
  - Negative traits can include being unable to work for a large company for a long time.
- Pricing during launch:
  - Guess what you should charge based on your business.
  - Talk to potential users for more insight on what they would pay.
  - Prices can always be adjusted later.
- Finding angel investors:
  - Y Combinator is a good resource for connecting with angel investors.
  - Attend startup events and network with potential investors.

- The best way to meet angels and investors is to have one invest in you and introduce you to others.
- It is not recommended for YC (Y Combinator) or any other organization to target high school students for funding.
- Starting a successful startup means giving up the carefree days of youth and being fully committed to the company.
- It is better to explore different options in high school and college rather than immediately choosing to start a company.
- Funding may be provided to college or high school students if they are already fully committed to their startup.
- It is important to have diverse experiences in your early 20s before entering the workforce.
- Starting a startup is a risky endeavor and should be carefully considered in one's life.

- The speaker introduces Paul Graham, founder of Y Combinator, for a conversation about their experiences in the tech industry.
- They discuss their involvement in creating Yahoo Mail and Gmail, and the process of coming up with innovative ideas.
- Graham emphasizes the importance of picking outrageous or naughty ideas with potential for success.
- They talk about the value of being a hacker and how laziness can sometimes lead to innovative solutions.
- The speaker shares their experience of finding co-founders for their internet business and the importance of trust.
- Y Combinator teaches counterintuitive lessons and the importance of doing things that don't scale in the beginning.
- Startups face challenges and the importance of talking to users, having a good founding team, and determination.
- The speaker briefly mentions Steve Jobs and the importance of being nice and friendly in business.
- They discuss the importance of launching quickly, scaling, hiring co-founders, and dealing with different commitment levels.
- Tips for user interviews, building what customers want, founder DNA, pricing, and finding angel investors.
- It is not recommended to target high school students for funding, and starting a startup requires full commitment.

Geoff Ralston interviews YC founder Paul Graham and draws out startup wisdom. Startup School is YC's free online program for founders. Sign up to access the full curriculum and over $100k in deals! https://www.startupschool.org/

We are trying something a little bit different this startup school year.

We are not just having our weekly 2 lecturers, but we are having some conversations with notable people and I couldn't be happier to have 1 of the most notable startup people here.

He'll get embarrassed when I say anything complimentary, so I'll try to avoid it.

Paul Graham, my friend and the founder of Y Combinator back in 2005.

And we're just gonna talk and hopefully it won't be boring.

So you and I got to know each other, strangely, at a, it was kind of a startup at the time, Yahoo back in the late 90s.

Why Combinator has the people who wrote Yahoo Mail and Gmail?

Paul Buchheit, who actually has more of a claim on actually writing Gmail than I do have a claim on writing Yahoo Mail.

I wrote some important parts of Yahoo Mail but Paul was kind of by himself doing Gmail almost and we were a little more intentional with Yahoo Mail and had a team creating something called Rocket Mail.

But it is a little weird that both of us ended up at YC years later.

I was at Yahoo Because we created something called Rocket Mail and we were purchased in 97, but Paul's company was bought in 98.

And so, you had this weird idea for a product, for something you thought people would want in the mid-90s, which had to do with SaaS before SaaS was a thing.

How did you come up with this idea for ViaWeb, the company that Yahoo bought?

Okay, so what we made was something that is now called a web app.

And that's why the company was called VIAweb, because it worked via the web.

And the way I remember very vividly, We thought back then, everybody thought that writing software was identical with writing software that ran on the client.

And worse still, for those of you who remember the mid 90s, the client meant Windows, right?

And like, we knew how to write software for Unix, we liked Unix.

We did not know how to write software for Windows, but we knew enough to know that we did not want to learn.

And so, we were really, really highly motivated to figure out how to write software without having to write software to run on Windows.

And so we thought to ourselves, well maybe, well you know the way I first thought of it actually was that you would have this, you would have, it was an online store builder, right?

And I thought that you could send it updates by email.

I thought you could send it updates by email, right?

And then I remember thinking, well if you can...

Posturists for shopping carts or whatever.

If you can use SMTP, why not HTTP to update your website?

Whoa, the software could run on the server and you could control it by clicking on links in the browser, would that even work, right?

But I remember I was like sleeping on a mattress on the floor in Robert's spare bedroom and I remember I sat up in bed when I thought of this like the letter L, right?

It was actually like 1 of those scenes in a movie.

I'm like, oh my God, we could avoid having to write software on Windows at all.

We never, at that point, we were never thinking about the benefits of web apps, which are great, as it turned out.

We were just thinking we could actually do this without ever having to learn.

It didn't matter that you could deploy then without having to ship software.

We could actually write this code and we'd never have to learn Windows.

Because the Netscape people had already gone through the pain of making Netscape work on Windows, right?

And we could just like, that was like a hole onto Windows.

You know, and people could get through the hole and click on links in the browser and control the software.

And so we immediately, we weren't even sure this would work because it was so weird.

But we immediately sat down and tried to write this really, really clunky website builder that worked by clicking on links.

It was terrible, but it did actually work.

It could make a website and like holy shit this actually works.

Yeah it's weird that like an innovative idea like that just sort of comes out of nowhere.

I mean it doesn't seem innovative now because all websites work that way, but the first 1, like that's going from 0 to 1.

It's very common for ideas, in retrospect, they seem obvious and you sort of, historians who weren't there, sort of straighten out all the kinks in the development and it just seems like, oh, they had this, you know, it's like this idea, I always hate it when people represent startup ideas as light bulbs, you know, because as well as being the most cliched metaphor imaginable, It's also false.

You don't just like have this idea and then realize it right no It's more like you have this sort of inkling that something you could do something that somebody else hasn't done before And it's probably a bad idea, but you're too lazy to learn Windows, and so you want to do it that way, right?

And so, or like who would, or like Zuck starting Facebook, you know, just like let's see what happens, right?

Way implausible if this would ever be a startup.

Hopefully some of your ideas seem really implausible.

I love it when ideas seem implausible in the right way.

Over the years, I mean I already had, just from being a hacker, a sort of, a good nose for this sort of thing, but it has become refined over all these years of dealing with startups.

And when people have, I was talking to some people yesterday and they were talking about 2 possible things they could do.

And 1 of them seemed so, it seemed like naughty.

Not like it was sort of maltreating anyone.

It was just sort of taking advantage of something that seemed like it shouldn't even be possible, right?

Like making the software run on the server and just like never, making software that seemed to the users to run on their computer but actually was just talking to them through the browser, that kind of naughtiness.

And I said like pick that 1 because it seems so outrageous, it seems so

It seems like There's all these ways we have talking about what's a good idea and when you try to match up ideas with them, it's always sort of a complicated, you know, it's like, is this idea naughty or is it not quite intuitive or not so obvious?

And it's really always hard to take any particular idea and say, is that the 1 with potential?

Well, you can't tell, in fact, that's another thing.

It's not just that the outcomes of startups are hard to predict.

I think to some degree they're actually indeterminate.

And so I think even if Y Combinator were as good at picking startups as you could possibly get, I mean in fact you have like 150 startups per batch of which maybe 5 will become giant or something like that.

Yeah, well depends on your definition of giant, right?

More like if for some definitions of giant, 1 every 5 batches.

Talking about the indeterminacy of ideas.

Even if you were able to pick perfectly, that doesn't mean you could get the batches down to only 5 startups.

You probably have to pick 20, I think, even if you were perfect.

There's this strange mix of Extraordinary hard work, an idea that actually has something to it but is not obvious.

I mean, you don't know comma yourselves, Not that you don't know yourselves, although that's also true.

So, and that's why it's good to be a hacker.

Because if you're some business person, you know, and you think, I am going to work on business opportunities, right?

Well, I don't know if this is a business opportunity, so I'm not going to work on it.

Whereas someone who's a hacker who's just doing things for the fun of it.

Laziness is actually in some cases really helpful.

I'm a little scared about this meme escaping into the wild.

They said laziness is good, he said from the sofa as he ate another donut.

It would be better if people thought laziness wasn't good because the laziness that people do that's good, they would do anyway even if they thought being lazy was bad.

Yeah, well using laziness, not in the normal sense of laziness, right?

Because if you're, there's no such thing as a lazy founder that builds a big company.

But a certain sort of, it's sort of a reticence to do something for some reason.

We're calling it laziness, but it's not really.

Avoiding things that seem like gratuitous Schleps.

It makes you, you know, if you have a natural hatred for gratuitous schleps, then that produces elegant solutions,

So in 1995-ish, I was like trying every single idea I could possibly try to start some internet business.

And I was doing it all by myself, which was awful.

And what I didn't know how to do was to find people to do it with.

And I kind of ran into a bunch of people and I had no clue whether they would be good people to start companies with.

And I was thinking about your experience.

You said you were like sleeping on Robert's floor.

You started ViaWeb with 2 fascinating people, Robert Maxwell and Trevor Blackwell, who later.

Robert Morris and Trevor Blackwell, Robert Maxwell.

Anyway, how did you pick them as co-founders?

And when did you decide they would be good co-founders?

They were extremely truculent co-founders who were very good at programming.

But I remember Robert was like not into the whole startup thing the entire way.

Whenever he was on the board, and whenever you get an acquisition offer, the board has to at least consider it, right?

And so, you would get these crap lowball acquisition offers.

We'll give you like 2000000 dollars in our stock, right?

No, no, Robert would say, like, we would vote on it and Robert would always say, well, you know, I have to be honest here, like, this would at least mean we could stop working on this thing and so, Yes, I would take this deal, right?

I made a deal with Robert that if he ever made a million dollars out of VIAweb, he would get an earring.

Robert is not the kind of guy who would enjoy having an earring, let me tell you.

And so, as soon as the deal closed, me and Trevor frog marched him to the place in Harvard Square where people get their things pierced.

There's photographs on the internet of Robert Morris with an earring.

You never thought you'd actually get the million dollars.

No, no, I really actually did, but I thought he would wear it for a bit longer.

Okay, so I chose Robert because he was my co-conspirator in everything.

And I don't mean I was always the lead and he was just the co-conspirator.

When he did things, I would be his co-conspirator too.

And I remember when he told me about it, and I said wow what a cool idea you should totally do that

He was the first famous hacker who really got in trouble.

He was the way it's true he was the first person to be prosecuted under the computer fraud and abuse act of 1986 which

So if you're looking for a co-founder, look at people who've been prosecuted because it works.

Okay, this is another meme we don't necessarily want to escape out there that Convicted felons are what you want to look for as co-founders

if they're convicted for that I may be it was funny because the FBI like like law enforcement kind of does things by the book, right?

Like Imagination is a big thing in in like Sherlock Holmes stories, but not in actual everyday law enforcement.

And so they have these, the FBI agent told me, they have these motives they look for, sex, drugs, money, revenge, right?

And so Robert did it out of curiosity, and that just like, it was just not on the list, right?

They really had a hard time figuring out what the hell was going on.

I think even within the government there were lots of people who did never understood what was going on.

Robert I picked because I would do everything with him, right?

He could program as fast as he could type.

Of course this was in C, which is a lot of very verbose language.

But he could program as fast as he could type.

He would, like if he didn't like what the operating system would do, he would edit the source and recompile it, and then

So, truculence aside, he was exceptional.

Like, when he showed up at Harvard, undergrads were only allowed to have accounts on the official undergrad computing system, often the Science Center, and there were all these real computers in the CS department in the Aiken lab and so they wouldn't give him an account there and so he just walked up to a machine you know switched it to single user with him as the super user, gave himself an account and then switched it back.

well he also wanted accounts on the right machines.

He got kicked, this whole thing will be about Robert.

He may be more interesting than anything else we can talk about.

He got kicked out of Harvard as an undergrad for reconnecting Harvard to the Internet.

Harvard had been 1 of the early internet nodes

That's not funny to like like get in trouble for Disconnecting a school from the internet connecting it connecting for connecting a

We're still trying to figure out why the heck you Trevor Oh,

I should tell you though about how he reconnected

to tell us about the disconnect really fast.

And by the time Robert arrived as an undergrad, the connection had died from bit decay.

That's how unimportant the internet was back then, or rather ARPANET as it was then called.

So RTM spent 1 whole semester working on getting Harvard reconnected to

And he didn't do any work for any of his classes and he got such bad grades he got kicked out for a year.

So We actually used that later as a recruiting technique because we knew that because there might be other people who got kicked out for spending all their time on some project.

And so we actually went around Harvard and posted up this poster saying, did you get kicked out for working on some project of your own?

We got a really good programmer that way.

tons of money off of options because we got acquired during the year right and he like enjoyed life out of school so much I don't think he went back until he was 25.

So All right so why did I put, why Trevor?

Robert was the guy you did everything with and he was great.

But by the way, when you picked Robert, did you know he was gonna be a pain in the ass in so many ways?

I didn't know the company was gonna be so hard and that it would bring out so much pain in

See all Y Combinator transcripts on Youtube

A Conversation with Paul Graham - Moderated by Geoff Ralston