There is a little-known company that is Silicon Valley's moral equivalent of “The Smoking Man” in The X-Files. It's one of the most influential tech companies in the world… and hardly anybody outside of Silicon Valley has heard of them. You’ve likely heard of their offspring though: Dropbox, Code Academy, Heroku, Genius.com and AirBNB.
Y-Combinator is a company that exclusively focuses on funding and launching tech startups, and readers are given insider access into their exclusive world through “The Launchpad” by Randall Stross.
Set in 2011, the book reads like The Shark Tank for tech startups, and is an outstanding overview of what it takes to launch a startup in Silicon Valley… in three short months.
Here are five lessons I’ve learned from “The Launchpad”:
- Always be closing. Paul Graham, the founder of Y-Combinator, quotes Glengarry Glen Ross when discussing the importance of sales. “A.B.C. A-always, B-be, C-closing. Always be closing! Always be closing!” Since Y-Combinator makes a modest initial investment in companies (around $15,000), it’s critical that they build revenue and investors immediately. If they can’t get customers or investors, and burn through the Y-Combinator money, it’s game over.
- Get set up as fast as you can. People accepted into Y-Combinator have three months to get their business and product ready to pitch to an investor. While the three-month grind sounds brutal, there are a lot of great reasons for doing it this way: It fosters quick decision making, sparks innovation and imbues a superb work ethic among participants. Also, if you’re going to fail, it’s better to fail quickly than have your business suffer a death by a thousand cuts.
- Make something people will use. Dropbox does file sharing. Code Academy teaches beginners how to code online. Heroku provides cloud infrastructure. Genius.com provides annotation information. AirBNB provides a marketplace for property owners and renters. There is a fairly obvious relationship between things people need and the most successful companies from Y-Combinator.
- Work in small teams. Y-Combinator accepts companies no smaller than two, and no larger than four. This size allows for fast decision making and low overhead while also allowing for some discussion about whether an new idea or direction is smart.
- Pivot if you need to. A shocking number of companies change their business plans during the three short months in Y-Combinator. The founders of Code Academy changed their business idea after spending two months on other initiatives. Good thing they did!
Should you read this book? Well, if you like The Shark Tank and technology, “The Launch Pad” is definitely for you.