'Founders at Work' Chronicles the American Idols of Startups

September 24, 2008

Tim Brady, founder of Yahoo ... Mitch Kapor, founder of Lotus Development ... Max Levchin, founder of PayPal ... Steve Wozniak, founder of Apple. All are legends in the technology world. We know their ideas were successful because we use their products every day.

But once upon a time, they were ordinary people. Where did they get their 'big ideas'? How did they muster the confidence to convince investors to back them? What made them overcome incredible odds to become rich and successful? In short, what was it like in the very early days of their startup businesses -- when no one knew their names?

"Founders at Work: Stories of Startups' Early Days" offers answers to these questions and more. Author Jessica Livingston is a founding partner at Y Combinator, a seed-stage venture firm and organizer of Startup School. Thanks to her research and interviews with 32 startup founders of successful technology firms, we have an amazing glimpse of the earliest days of startups that have become part of today's business lexicon.

If you've ever consider one day turning your own big idea into a business, "Founders at Work" is essential reading. If you just want to understand today's business models and their origins, this is your book. In the founders' own words you will come to understand what it takes to turn your idea into a value-creating juggernaut. The stories range from Craigslist, begun with a simple altruistic motive, to Yahoo!, an idea that took on a larger-than-life of its own.

Step one: a great idea

An oft-quoted observation from Apple founder Steve Wozniak: "All the best things that I did at Apple came from (a) not having money and (b) not having done it before, ever." Ask a successful startup founder his or her secret for success and you'll likely get an answer that is some variation of this.

Startup founders are creative thinkers, for sure. But sometimes it simply took old-fashioned determination to transform their idea into reality. One thing the founders had in common in the early days was a passion for their idea and the absolute conviction that it held value. Their Big Idea was something people needed.

Some founders started with business plans, others did not. A striking pattern emerges from the various stories: Whether or not you have a plan, there is one certainty: the plan will change -- sometimes drastically. So be prepared to be flexible.

Charles Geschke, cofounder of Adobe Systems, recalls advice from a successful mentor: "You guys are nuts. Throw out your business plan. Your customers -- or potential customers -- are telling you what your business should be. The business plan was only used to get you the money. Why don't you rewrite a business plan that is focused just on providing what your customers want?"

This is the essence of the successful startup: Never, ever lose sight of what your customers want. Pay attention to their needs at all times. Keep a close watch on feedback and respond, respond, respond.

Hard times, hot times

"There were times when we were really broke before we had our angel investment, when only one guy who had children was getting paid." -- Caterina Fake (Cofounder, Flickr)

Steve Wozniak's story of the development of Apple goes way back to the early 1980s. He endured his share of frustrations and roadblocks, but his passion and conviction kept him going through the rough patches.

"Entrepreneurs have to keep adjusting to … everything's changing, everything's dynamic, and you get this idea and you get another idea and this doesn't work out and you have to replace it with something else," Wozniak says. Adding to the pressure, "Time is always critical because somebody might beat you to the punch."

Wozniak adds this piece of advice, echoed by other startup founders: "It's better to be young because you can spend a lot more nights, very, very late. Because you have to get things done, and there's almost no other way to get around that."

When to make the leap

Joshua Schachter, founder of del.icio.us, was working at Morgan Stanley while developing the concept of "tagging" as a hobby. He put del.icio.us on a server and opened it up to other people, and it began spreading by word of mouth. Apparently he had tapped a pent-up demand for his Big Idea.

In early 2005 Schachter decided to turn del.icio.us from a hobby into a company. Schachter was lucky: His employer gave their blessing, encouraging him to take the leap and launch his dream. After raising $1 million in funding. He started the company in March; by December of that year, Yahoo acquired del.icio.us for an amount rumored to be about $30 million.

Of course, not everything happens as fast as Schachter's amazing success story. And Schachter had his share of headaches as the users overwhelmed his technology, causing crashes and slow site performance. It was tough to keep up with the demand and improvise improvements.

During the rocky early months, Schachter recalls going without pay in order to make sure the partners with families were paid. He didn't let this discourage him: It was obvious he was on to a Big Idea and it was only a matter of patience and persistence before the technology caught up with the ultimate goal.

There were some near-calamities along the way. "Site's down. Site's slow. Table crash … that happened all the time. A great deal of what we did was putting out fires.

Persistence is the message. Hold on to that dream. If it has value, it will grow and flourish.

Bottom Line:

Among the essential patterns from the Founders at Work in their early days:

  • Passion is key to success. You absolutely must be passionate about your idea and be prepared to follow a sometimes labyrinthine road in pursuit of your dream.
  • Don't get stuck on the first idea. Sometimes the best ideas morph into something entirely new and exciting -- the one Big Idea that best addresses the needs of potential customer.
  • Business plans can be essential, but be prepared to change them, over and over.
  • Don't let anyone tell you no when your heart says yes. Ignore conventional advice and be prepared to take some big risks. Be "unencumbered by reality."
  • Be persistent.