3 Tips For Startup Founders From Paul Graham of Y Combinator

TechCrunch had a good interview with Paul Graham of Y Combinator on what he looks for in an entrepreneur.

I find Paul super-bright…and he has invested in over 200 companies over the last 5 years so he’s got some data to support his ideas.

So listen up, founders (wannabe founders too)!

3 Tips for Startup Founders

1) The Founder Is More Important Than The Idea

Graham bets on the jockey, not the horse.

2) The Relationship Between The Founders Is Very Important

The relationship between founders is key. Founders are ideally friends for awhile or have worked together on things.

“What we don’t like is people who only came together for purposes of this startup.”

Reason: If the startup is all that ties them together, that gives little to hold the startup together (especially during crises).

Close friends will even keep working on a startup out of loyalty to their pal.

3) The Founding Team Should Have A Clear Leader

“It’s really bad if we’re talking to a startup and we can’t figure out who the leader is.”

Each startup should have one person who is clearly in charge, Graham says. And they should be sufficient ass-kickers.

He gives Mark Zuckerberg (Facebook) and Larry Page & Sergey Brin (Google) as examples of forceful leaders.

A good test of whether there is a clear leader among founders: If you can’t figure out who to ask a question to (of the founder team) (e.g. if they all respond as peers, then that’s bad).

“It’s good if there’s one [founder] who pushes the other [founders] out a bit…steps forward a little bit.”

Well said.

Separately, I heard Paul mention something at the CrunchUp Social Currency conference I was at last week about the ideal size of  the founding team of a startup:

• 2 to 3 founding person team is best
• 1-person founding team is next best
• 4-person founding team is worst

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What Makes A Good Startup Entrepeneur by Ron Conway & Paul Graham

Fun panel at today’s CrunchUp with:

• Paul Graham, YCombinator
• Ron Conway, SV Angels
• Michael Arrington, TechCrunch

Here are notes of my favorite nuggets:

Ron Conway on data about his 500 startup investments:

• “The success rate in our portfolio is going from 10% to 15% right now…because of the$25 million to $50 million M&A deals.”
• Failure Rate was 77% leading up to the Internet Bubble of 2001…and now is about 40% post bubble (2002 to today)
• “Repeat-entrepreneurs” have about a 66% rate of success in their second startup.
• Deal flow did not decrease during mortgage bubble.
• Entrepreneurs have the same level of success regardless of the climate.

Check out Ron Conway data here for more on the data from his deals)

Here are some more Ron Conway thoughts:

• “Getting your money back( (from an entrepreneur) is not a bad deal”
• Shawn Fanning is one of the top entrepeneurs he’s worked with.
• Mark Zuckerberg…has grown in maturity and saaviness of being a leader…”on an algorithmic scale.”
• Great defining companies are being created at a much quicker rate than they were 10 years ago. Awesome news for entrepreneurs.
• An ideal entrepreneur is a little bit crazy (crazy-smart) is good

Paul Graham on ideal size of a a founding startup team:

• 2 and 3-person startups are the best
• 1-person startup is the next best
• 4-person startup is the worst

Michael Arrington: Facebook is offering one-tenth of a percent of equity to top of the top engineers.

Check out Ron Conway’s Three-Megatrends of The Internet to see what markets Ron Conway is interested in.

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