Sunday, June 14, 2026

14: Paul Graham

How to Earn a Billion Dollars Since we started it in 2005 we've funded about 6500 companies. .................. Starting a successful startup is the most common way to become a billionaire, so in effect I've spent the last 21 years training people to become billionaires. So far about 30 of them have, but there are many more in the pipeline. ...............

when I meet a founder, the first thing I ask about is their growth rate.

............... If your revenues grow at 15% a month, how much more will you be making 5 years from now? To calculate that, we need to find 1.15 to the 60th power (since 5 years is 60 months). So go to Google again and this time type 1.15^60. The answer should be about 4384. Meaning in 5 years your startup will be making 4384 times as much. If you're currently making ten thousand a month, in five years you'll be making about 44 million a month, or 526 million a year. And at that point, if you own as much of the company as founders typically do, you will be a billionaire. .............. If your revenues grow at 15% a month, how much more will you be making 5 years from now? To calculate that, we need to find 1.15 to the 60th power (since 5 years is 60 months). So go to Google again and this time type 1.15^60. The answer should be about 4384. Meaning in 5 years your startup will be making 4384 times as much. If you're currently making ten thousand a month, in five years you'll be making about 44 million a month, or 526 million a year. And at that point, if you own as much of the company as founders typically do, you will be a billionaire. ................ Exponential growth is like magic. It generates outcomes that seem impossible. ................. that's the other reason I always begin by asking founders their growth rate. It shows whether they've built the right thing. .............. Whatever you and your friends start using now, everyone is going to be using in ten years. Since your intuitions about other people's needs are usually a crap signal, and your own needs are an especially valuable one, you should usually listen to the second signal; you should make something you and your friends want. ................... the market size. Since you predict future demand, the market will grow. And it's always possible to expand into adjacent markets. All you need is a beachhead in the territory of unsatisfied need that you can expand from. ................ How do you get an idea like that? The answer is one of the most counterintuitive things about startups — which is saying something, because there are a lot of counterintuitive things about startups. But the way to get the very best startup ideas is not to look for startup ideas. If you're consciously looking for startup ideas, it will make you too conservative. You'll lop off the outliers. Because the very best startup ideas tend to sound so lame, at first, that you'd reject them if you were consciously looking for startup ideas. That's what has prevented them from being discovered. ...................... Imagine what a bad idea Apple or Facebook or Airbnb seemed at first. How many people are going to want their own computers? How is a company going to make money from undergrads stalking one another online? Who's going to pay to sleep on an airbed on someone's floor? We know how these ideas turned out, so it's easy to rewrite history, but I remember very well how bad Facebook and Airbnb sounded at first.

We funded Airbnb, and we thought the idea was bad. The reason we funded them was just that we liked the founders.

..................... They're just something people built because they thought it would be cool. That's how Apple and Google and Facebook all started. None of them were meant to be companies at first. .................. This is one of those cases where your unconscious mind knows more than your conscious mind does. ................ Whatever you build couldn't possibly sound more preposterous than a startup we funded in 2006 called Justin.TV. It consisted of one guy, Justin Kan, walking around with a camera on the side of his head, live streaming everything that happened to him. But this company ended up doing quite well. In fact you've probably heard of it, but under its new name, Twitch.

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