Growing companies is just as important as starting companies. Making a startup really successful startup requires two very different skills: product development and company development. In this blog, Sam Altman, CEO of OpenAI, covers the important fundamentals of starting a startup and some of the biggest challenges startups face.
1. Don’t start a business if you're not ready
Starting a company seems much more glamorous than it is. In reality, it’s one of the hardest jobs you can find.
I worry that, as starting a company becomes more and more fashionable, many people are doing it for the wrong reasons. Most people don’t have a founder’s skillset and won’t make the right decisions, so I try to warn them about all the negative parts of founding a company, such as:
- It’s unpredictable and unpleasant.
- It will ruin the rest of your life.
- You’ll probably fail.
- Startups are becoming a default career trajectory, which I think is dangerous, so I try to provide that reality check.
- Most people shouldn’t start a company, so only found one if you really want to.
2. What you can learn from your elders
Founding a startup can feel like a hazing ritual, a trial-by-fire where you’re just expected to “figure it out.”
These days, many CEOs approach scaling a company with just that mentality. On the early side, founders were in that same trial-and-error boat before YC, but now we have best practices and communities to support startups.
"I similarly believe it’s possible to codify and teach scaling. While there are some mistakes that people just have to make themselves, you can learn the best paths and what mistakes to avoid from those who have gone before you." - Sam Altman, CEO of OpenAI, on what you can learn from your elders.
3. Beware of distractions
We often see a phenomenon with YC companies where during the program:
- They’re extremely focused.
- They don’t get distracted.
- They work on the right projects.
- The company does well.
But then, after they graduate YC, the distractions start:
- They start going to conferences.
- They focus on their advisors.
- They take meetings instead of grinding.
We’re still trying to figure out the best way to prevent these challenges for startup founders. One helpful practice is having alumni speak to our current class about their successes and failures after YC. When current founders hear their peers say they regret the distractions, the message sticks.
It’s a sad truth, but the work that makes a startup successful is often not the most enjoyable. Success for a startup requires grinding away in an office, not attending conferences in beautiful places around the world. It’s not glamorous and it’s not always fun.
4. Find your network
To start a company, you need a network of driven peers, investors, and employees. Since startup culture has seeped into the rest of the world, being in the Bay Area is not as critical as it used to be—but the Bay Area still offers the best network.
YC has always been a believer in democratizing help for companies. We started Startup School Beijing because many of the most talented entrepreneurs can be found there.
While you can certainly build a strong network online or in other cities, you’ll typically have to work harder to do so than simply being in the Bay Area.
5. How to think bigger
It’s become easier to start a hard company than an easy company.
Since there are so many startups now, it’s become incredibly difficult to recruit top talent and to get attention from the press, customers, investors, and advisors. If a company isn’t trying to tackle a big mission, there’s often this sense of “So what? Your company is just another enterprise software startup.”
To help companies scale later, we focus earlier. At the very beginning of YC, we encourage more ambition. The potential of a big, bold impact is critical to attracting people to your mission down the road. If you start a company that people won’t get passionate about if it’s successful, you’ll run into problems scaling.
On top of that, we recommend setting up a Special Purpose Vehicle (SPV). Startups do not necessarily require it but there are cases where utilizing an SPV can be advantageous to the business. The benefits of SPV include risk mitigation, asset securitization, and tax optimization.
6. Don’t chase trends—chase problems
"In general, I don’t focus on trends. I want to find the most incredible people in the world and support them working on what drives them. At the end of the day, they’ll spot the trends better than I can." - Sam Altman, CEO of OpenAI, on following the trends.
With AI, for example, we’re at a moment of incredible shift. Ten years ago, self-driving cars were science fiction. Now, computers are doing incredibly economically valuable activities that we thought only humans could do. Over time, I think all repetitive human work will be doable by AI, freeing humans to work on the more interesting tasks.
But I don’t support companies simply because they’re in the AI space. Instead, I find people intrinsically driven to solve a specific problem, because they’re the ones who will keep going when others become bored with the trend.
Conclusion: don’t start a company unless you really want to
Starting a company is no walk in the park, as explained by CEO of OpenAI, Sam Altman, in this blog.
If you ultimately decide to do it, be sure to take in as much as you can from expert advisors. Becoming Dropbox, Airbnb, or Stripe is tough, so we’re trying to help in any way we can.
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