Paul Graham knows some things about startups and founders. In 2005, the venture capitalist cofounded Y Combinator, a startup accelerator that’s helped Airbnb, Stripe, and other tech companies take off.
On Saturday, Graham mused on why some entrepreneurs succeed and others don’t.
“Someone asked me what was the most luck-dependent thing in startups. I replied: whether you’re suited for it. Only a tiny fraction of people are,” he tweeted.
When asked to describe in a single word the key characteristic, he replied, “Determined,” noting that it’s “very common” for someone who is suited for launching startups to “only succeed on the third or fourth try.”
But, he added, it isn’t obvious who has this quality. “If it were,” he noted, “YC would have a much higher success rate.”
One Twitter user asked, “Are you saying that this is something that you can’t change? Something you can’t get better at?”
Graham replied, “If you’re suited for it, you can get better at doing it. But you can’t get significantly better at being suited for it.”
In the case of Airbnb, the determination of its founders impressed Graham more than their business idea. Brian Chesky, Joe Gebbia, and Nathan Blecharczyk launched the company in 2008 but were rejected by venture capitalists. Graham, too, was skeptical of the idea that people would invite strangers to stay in their home.
But then Graham got a glimpse into the founders’ determination. Faced with rejection from potential backers, now-CEO Chesky and his partners had instead raised funds from their own customers by selling them $40 cereal boxes. The team custom-designed and hand-glued the boxes to feature then-presidential candidates Barack Obama and John McCain, offering them as a breakfast option to Airbnb customers, some of the first of whom were people attending the Democratic and Republican national conventions. The boxes proved popular and sold unexpectedly well.
As Chesky recalled at a recent Stanford Graduate School of Business event, Graham asked the founders about the boxes at the end of their interview, which had gone badly. They replied, “This is how we funded the company because no other investors gave us money.”
Graham was suddenly impressed. “Well if you can figure out how to get people to pay $40 for a $4 box of cereal, maybe, just maybe, you can convince strangers to live with each other,” he told them.
Y Combinator then invested in Airbnb, which today has a market cap of nearly $70 billion.