Mike-O-Matic

In reading Paul Graham’s post the other day, I found myself conflicted.

His advice, as always, is invariably good; still, it left me feeling that it was somehow less than the sum of its parts. In the attempt to glean a nice, easily-packaged takeaway from his logical exercise, I believe Mr. Graham skipped a few crucial things which could undermine would-be Mini-Bills.

The premise of the article was stated as such:

Till recently graduating seniors had two choices: get a job or go to grad school. I think there will increasingly be a third option: to start your own startup.

To support this, he highlighted five advantages young entrepreneurs have relative to older people:

If you start a startup soon after college, you’ll be a young founder by present standards, so you should know what the relative advantages of young founders are. They’re not what you might think. As a young founder your strengths are: stamina, poverty, rootlessness, colleagues, and ignorance.

It would be hard to argue with any of these things. Startups certainly require an inordinate amount of hard, thankless work, flexibility, and thriftiness. It is rare to find suitable startup conspirators in your day-to-day life when you are working an “adult” job, and “ignorance” is helpful in that you don’t know enough not to try.

There are many things that work against young entrepreneurs, however. Here is a list of several:

1. They Don’t Know the RIGHT People: College students certainly have an abundance of other students around them, but the fact of the matter is that most of these colleagues are not really helpful when looking to start a new company. Even if we use the “Silicon Valley” style of startup as a model, most successful endeavors consist of both a technical genius and a sharp businessperson. Microsoft had Paul and Bill. Apple had Steve W. and Steve J. Sun had Bill Joy and Scott McNealy, amongst others. If you are a technically-inclined person (as I suspect most of Paul’s readers are) the missing link is on the business side. It will require a comparable amount of effort for a college student to find this partner (through attending business school functions, going to different parties to expand their networks, etc) as it would for an older person.
2. They All Have the Same Ideas: College students tend to have tunnel vision when it comes to developing new product ideas. They all think mass-market, they all think flashy, they all think in terms of what they and their friends would like to see. (I use the word “all” recklessly here, and apologize. I don’t mean it literally.) This is, of course, perfectly in line with the Silicon Valley startup ethos, where you swing for the fences and either become a household name or a footnote. Most entrepreneurs succeed by finding market niches which aren’t so obvious and somehow filling them better than the competition. This takes time and above all experience in the field in question, something that college students would have a hard time matching.
3. It’s the Marketing, Stupid: There is a lot more to founding a successful company than getting Version 1 of the product out the door. It is what follows that actually determines where you go. I have seen a couple Web 2.0 launches that consist mainly of placing a notification on craigslist or digg.com and waiting for the users to arrive. Marketing takes discipline and hard work, and older people are much more likely to have useful contacts and experience in this part of the process.
4. Young Adults are Flaky: This was alluded to in the article, but I though it was worthy of inclusion here. Too many young entrepreneurs I have known get discouraged easily when an idea doesn’t take off right away, or become involved in intrigues with cofounders over splitting up their company shares, or other destructive activities which essentially neuter the company. Starting a company is a slog, and it involves spending a good deal of your time out of your comfort zone. Frankly, most adults can’t do this either. Those who decide to make the leap to founding their own company, however, are more likely to be ready for the challenges involved. Did you ever have a class in college with one or two students who were 15 years older than everone else? I did. And they beat my ass on every test. When adults make up their mind to do something, they can usually follow through.
5. Kids are Good Pirahna Bait: Young adults are less likely to have money on their own and be able to self-fund their startup, and this has two interesting implications. One, it puts them in a position of needing to get funds from an outside source with very little leverage to determine the terms. Mr. Graham’s Y-Combinator seems to be one of the most generous companies in the early-round funding industry, and they get 6% of the company for an investment as low as $6,000. While that level of funding certainly has its niche, you won’t be able to do a whole lot of promotional work with it. If the company founders don’t manage it correctly, venture funding can become an addiction; a welcome friend to give you a boost when the world around you doesn’t give you the validation you need. Two, not investing their own money means that recent college graduates don’t have any “skin in the game.” They don’t have to think about what it took to earn that money in the first place, and will correspondingly not work as hard to save it. Many entrepeneurs I have talked to tell me that what lead them to become good business people was the realization that they had no money in the bank and children to feed. Things become much more real then, and all new forms of creativity started pouring out.

Despite all of that, I do tend to agree with Mr. Graham’s premise, that people should start their careers with founding their own company in mind. They need to be selective about timing, though.

With all of their pitfalls, people tend to underestimate the benefits of day jobs. They build character and experience, put some money in your bank account, and teach you important lessons about the shapes businesses can take and how industries function. Like everything else in life, they are what you make of them. Just like it is often a mistake to go from college to grad school without taking time out in between to sample what the working world is like, it can be a mistake to go from college right into your own startup.

Sometimes you need to see things being done incorrectly before you know how to do them right.

Til next time.

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