Startup God Paul Graham's Life-Changing Advice for Entrepreneurs

06/25/2015 04:51 pm ET | Updated Jun 25, 2016

If you're an aspiring entrepreneur or an existing one and haven't heard of Paul Graham, you've probably been living under a rock!

Paul Graham is the co-founder of one of the most sought after Silicon Valley tech accelerator - Y Combinator. He is known for turning half-cooked business ideas into fast-growing companies in a matter of months. There are many runway hits from his fold - AirBnB, Dropbox, Reddit, etc.

Paul Graham is also a prolific writer and his essays are some of the most widely read pieces on startup advice. I've compiled some of his life changing advice, those that made a difference to my startup journey at Arkenea LLC and am sure will make a difference to yours.

1 - You don't have to be an expert in startups to succeed at one
The way to succeed in a startup is not to be an expert on startups, but to be an expert on your users and the problem you're solving for them. Mark Zuckerberg didn't succeed because he was an expert on startups. He succeeded despite being a complete noob at startups, because he understood his users really well.

2 - How to come up with startup ideas
If you make a conscious effort to think of startup ideas, the ideas you come up with will not merely be bad, but bad and plausible-sounding, meaning you'll waste a lot of time on them before realizing they're bad.

Instead of making a conscious effort to think of startup ideas, turn your mind into the type that startup ideas form in without any conscious effort. In fact, so unconsciously that you don't even realize at first that they're startup ideas.

So how do you turn your mind into the type that startup ideas form in unconsciously? (1) Learn a lot about things that matter, then (2) work on problems that interest you (3) with people you like and respect. The third part, incidentally, is how you get cofounders at the same time as the idea.

When you have an idea for a startup, ask yourself: who wants this right now? Who wants this so much that they'll use it even when it's a crappy version one made by a two-person startup they've never heard of? If you can't answer that, the idea is probably bad.

3 - Should you plan for a big-bang launch?
So why do founders think launches matter? A combination of solipsism and laziness. They think what they're building is so great that everyone who hears about it will immediately sign up. Plus it would be so much less work if you could get users merely by broadcasting your existence, rather than recruiting them one at a time.

But even if what you're building really is great, getting users will always be a gradual process--partly because great things are usually also novel, but mainly because users have other things to think about.

4 - The best way to convince investors
Since fundraising appears to be the measure of success for startups (another classic noob mistake), they always want to know what the tricks are for convincing investors. We tell them the best way to convince investors is to make a startup that's actually doing well, meaning growing fast, and then simply tell investors so.

5 - How to make $25 million in 4 years
If you have 100 users, you need to get 10 more next week to grow 10% a week. And while 110 may not seem much better than 100, if you keep growing at 10% a week, you'll be surprised how big the numbers get. After a year, you'll have 14,000 users, and after two years you'll have 2 million.

If you can hit 10% a week you're doing exceptionally well. If you can only manage 1%, it's a sign you haven't yet figured out what you're doing. A company making $1000 a month (a typical number early in YC) and growing at 1% a week will 4 years later be making $7900 a month, which is less than a good programmer makes in salary in Silicon Valley. A startup that grows at 5% a week will in 4 years be making $25 million a month.

The best thing to measure the growth rate of is revenue. The next best, for startups that aren't charging initially, is active users. That's a reasonable proxy for revenue growth because whenever the startup does start trying to make money, their revenues will probably be a constant multiple of active users.

6 - How to build a billion-dollar company
The way to do really big things seems to be to start with deceptively small things. Maybe it's a bad idea to have really big ambitions initially, because the bigger your ambition, the longer it's going to take, and the further you project into the future, the more likely you'll get it wrong.

Don't try to construct the future like a building, because your current blueprint is almost certainly mistaken. Start with something you know works, and when you expand, expand westward.