I gave a 3rd lecture last evening in Reykjavik University for the class How to Start a Startup. This lecture was the counterintuitive nature of Startups and based on the talk Paul Graham gave in the same class last year in Stanford University. If you have not listened and read the annotated text in Genius.com, you should. Here is the link to my presentation slides.
Startups are hard because they are counterintuitive. Paul clearly walks through the 5 counterintuitive things about startups. In addition to going through the lecture, I also screened the documentary Something Ventured. The assignment for the class is to combine the lecture and the documentary and come up with a one page narrative about Before the Startup.
There were some interesting questions during the class, like if I wanted to start a restaurant is that a startup? well, my answer was quite simple, Restaurants cannot be scaled globally unless you have the ideas of building a chain like Starbucks or McDonalds or KFC. Those businesses can be scaled to a larger audience and there is obvious risk in building them but the quintessential question is always, why is your restaurant 10 times better than everything else out there? That is a tough question. I am not a big fan of restaurants, primarily because of the substitutability of your service. Food is a perfect substitute and restaurants always look busy because the only time you go to a restaurant is when you need to eat. The overhead cost of running a restaurant is really high and there is a reason why there is high mortality rate for restaurants. That being said, if in your heart starting a restaurant is going to really fulfill your dream, my recommendation is always just do it. It does not matter what anyone says. This comes to the most important paragraph in the book Zero to One: Notes on Startups, or How to Build the Future. The book is a required reading for the class. I want to transcribe the page 10 of the book on Startup Thinking, I think that section clearly articulates my feeling on what a Startup should be.
New technology tends to come from new ventures-startups. From the Founding Fathers in politics to the Royal Society in science to Fairchild Semiconductor’s “traitorous eight” in business, small groups of people bound together by a sense of mission have changed that world for the better. The easiest explanation for this is negative: it’s hard to develop new things in big organizations, and it’s even harder to do it by yourself. Bureaucratic hierarchies move slowly, and entrenched interests shy away from risk. In the most dysfunctional organizations, signaling that work is being done becomes a better strategy for career advancement that actually doing work (if this describes your company, you should quit now). At the other extreme, a lone genius might create a classic work of art or literature, but he could never create an entire industry. Startups operate on the principle that you need to work with other people to get stuff done, but you also need to stay small enough so that you actually can.
Positively defined, a startup is the largest group of people you can convince of a plan to build a different future. A new company’s most important strength is new thinking: even more important than nimbleness, small size affords space to think. This book is about the questions you must ask and answer to succeed in the business of doing new things: what follows is not a manual or a record of knowledge but an exercise in thinking. Because that is what a startup has to do: question received ideas and rethink business from scratch.