1.2 It’s Your Revolution
Learning Objectives
Name firms across hardware, software, and Internet businesses that were founded by people in their twenties (or younger).
Gain strategies and advice to plan your journey if you’re interested in starting a startup.
Understand the concept of the Startup Accelerator and recognize firms that have gone through Y-Combinator.
Figure 1.2 Bill Gates Mug Shot
Wealth accumulation wasn’t the only fast-paced activity for young Bill Gates. The Microsoft founder appears in a mug shot for a New Mexico traffic violation. Microsoft, now headquartered in Washington state, had its roots in New Mexico when Gates and partner Paul Allen moved there to be near early PC maker Altair.
Source: Wikimedia Commons.
The intersection where technology and business meet is both terrifying and exhilarating. But if you’re under the age of thirty, realize that this is your space. While the fortunes of any individual or firm rise and fall over time, it’s abundantly clear that many of the world’s most successful technology firms—organizations that have had tremendous impact on consumers and businesses across industries—were created by young people. Consider just a few:
Bill Gates was an undergraduate when he left college to found Microsoft—a firm that would eventually become the world’s largest software firm and catapult Gates to the top of the Forbes list of world’s wealthiest people (enabling him to also become the most generous philanthropist of our time).
Michael Dell was just a sophomore when he began building computers in his dorm room at the University of Texas. His firm would one day claim the top spot among PC manufacturers worldwide.
Mark Zuckerberg founded Facebook as a nineteen-year-old college sophomore.
Steve Jobs was just twenty-one when he founded Apple.
Sergey Brin and Larry Page were both twenty-something doctoral students at Stanford University when they founded Google. So were Jerry Yang and David Filo of Yahoo! All would become billionaires.
Kevin Systrom was twenty-six when he founded the photo-sharing service Instagram. In just eighteen months, his thirteen-person startup garnered 35 million users worldwide, including 5 million Android users in just a single week, and was sold to Facebook for a cool $1 billion. Systrom’s take was $400 million. Snapchat founder Evan Spiegel dropped out of college to focus on his new firm. By age twenty-four he was running a firm valued at over $15 billion with a personal net worth of over $1.5 billion. Tony Hsieh proved his entrepreneurial chops when, at twenty-four, he sold LinkExchange to Microsoft for over a quarter of a billion dollars. He’d later serve as CEO of Zappos, eventually selling that firm to Amazon for $900 million. Brian Chesky, Nathan Blecharczyk, and Joe Gebbia, the triumvirate who co-founded Airbnb, were also all in their twenties. As of this writing, the firm is worth over $85 billion—even after the toll the pandemic took on the travel industry.
Steve Chen and Chad Hurley of YouTube were in their late twenties when they launched their firms. Jeff Bezos hadn’t yet reached thirty when he began working on what would eventually become Amazon. The founders of Dropbox, Box, and Spotify were all under thirty when they founded businesses that would go on to be worth billions. Irish national Patrick Collison and his younger brother John sold their first company for $5 million. Patrick was just twenty-one when he and John co-founded Stripe, a payments firm now valued at $95 billion, making it, at the time, the most valuable startup in the United States. The founders of Rent the Runway, Jenn Hyman and Jenny Fleiss, were in their twenties and still in grad school when they launched the firm that is recasting how millions of consumers engage with high-end designer apparel and accessories. Whitney Wolfe Herd founded Bumble when she was twenty-five; less than seven years later her firm went public with a valuation of about $7 billion. Just a few years out of undergrad, dancer and fitness enthusiast Payal Kadakia launched ClassPass, a service allowing customers to take fitness classes from multiple providers and that had been valued at over $1 billion before it was acquired. Melanie Perkins was a nineteen-year-old frustrated design student in Australia when she first got the idea for Canva, a firm she’s led to an over $26 billion valuation (a prior round had valued the firm at $40 billion) and that has become a leader in bringing generative AI tools to the masses.
How Canva Made Easy Graphic Design a Billion-Dollar Tech Tool
Melanie Perkins got the idea for Canva when she was just nineteen. Today she’s CEO of a firm valued at over $26 billion that is a leader in consumer-accessible generative AI tools.
Early bloomer David Karp actually quit high school for self-paced, tech-focused home schooling. It was a good move: He was taking meetings with venture capitalists at twenty, went on to found what would become one of the world’s most visited websites, and sold that website, Tumblr, to Yahoo! for $1.1 billion at an age when he was younger than most MBA students. Another young home schooler, Palmer Luckey, started “modding” video game controllers at age fifteen, founded Oculus as a teenager, and sold it to Facebook for $2 billion (that’s two Instagrams) by age twenty-one, and all before his company had even shipped its first consumer product. In another brilliant sign of the times, Luckey jump-started his effort not by gaining investment from angel investors or venture capitalists, who would demand an ownership stake in his business, but from a Kickstarter campaign. Hoping to raise $250,000, Luckey’s Oculus Rift campaign actually raised over $2.4 million without giving up a single share of equity.
Your author has also seen many former students build thriving businesses they started in their early twenties. These include Nick Rellas, the cofounder and first CEO of Drizly, which sold to Uber for over $1 billion; Bill Clerico, cofounder of WePay, which sold to Chase for $400 million; Andrew Chang, who cofounded blockchain firm Paxos, which hit a valuation of $2.4 billion; and Andrew Boni, who leads the marketing tech firm Iterable he cofounded, and gained a valuation of over $2 billion. Rellas founded his firm while still an undergraduate; Clerico, after spending the year after graduation as an investment banker; and both Chang and Boni were still in their early twenties when they founded their respective firms. Dozens of other former students of mine have created thriving tech businesses (for the curious, I have a post on Substack highlighting many former students; refer to the “The Lucky Chairs” article). First-hand experience shows what can be accomplished by bright, dedicated, hard-working young people.
This trend will almost certainly accelerate. We’re in a golden age of tech entrepreneurship where ideas can be vetted and tested online, and funding crowdsourced, Kickstarter-style; “the cloud” means a startup can rent the computing resources one previously had to buy at great expense; app stores give code jockeys immediate, nearly zero-cost distribution to a potential market of hundreds of millions of people worldwide; and social media done right can virally spread awareness of a firm with nary a dime of conventional ad spending. Crafting a breakout hit is tough, but the jackpot can be immense.
And you don’t have to build a successful firm to have an impact as a tech revolutionary. Shawn Fanning’s Napster, widely criticized as a piracy playground, was written when he was just nineteen. Fanning’s code was the first significant salvo in the tech-fueled revolution that brought about an upending of the entire music industry. Finland’s Linus Torvalds wrote the first version of the Linux operating system when he was just twenty-one. Today Linux has grown to be the most influential component of the open source arsenal, powering everything from cell phones to supercomputers.
TechCrunch crows that Internet entrepreneurs are like pro athletes—“they peak around [age] 25.” Bloomberg Businessweek regularly runs a list of America’s Best Young Entrepreneurs—the top twenty-five aged twenty-five and under. Inc. magazine’s list of the Coolest Young Entrepreneurs is subtitled the “30 under 30.” While not exclusively filled with the ranks of tech startups, both of these lists are nonetheless dominated by technology entrepreneurs. Whenever you see young people on the cover of a business magazine, it’s almost certainly because they’ve done something groundbreaking with technology. The generals and foot soldiers of the technology revolution are filled with the ranks of the young, some not even old enough to legally have a beer. For the old-timers reading this, all is not lost, but you’d best get cracking with technology, quick. Junior might be on the way to either eat your lunch or be your next boss.
Want to Start a Startup?
It’s not surprising so many university students experiment with startup ideas. It’s easy to find cofounders, mentors love speaking with enthusiastic young people, and the stakes are also among the lowest they’ll ever be in one’s life. If you’re living on campus, you’ve got housing, you likely have a meal plan, you’ve got great Internet service, and you probably don’t have a family that you need to support. Also, a few years of experimentation at college may help you refine a product to the point where you’re ready to try to raise money and build your own firm rather than take a job working for someone else. Trying to build a startup as a “side gig” while working a full-time job is really rough.
If you want to start a startup, some of the best things that you can do are 1) attend high-quality startup-focused events, 2) attend tech events if you’re building a tech startup, and perhaps most important, 3) start building product. If your university has a startup club, join it. If not, start one. I’ve worked with my university to create entrepreneurship initiatives that include an “Elevator Pitch” competition (think a timed, sixty-second idea pitch, à la Shark Tank); a year-long accelerator program where students are paired with experience mentors; and a final Venture Competition and Demo Day where students show real products and compete for cash prizes that university alumni have generously donated. Have real investors and entrepreneurs judge these competitions—not students or professors (unless your profs have started their own firms). Experienced and well-connected judges will give you the best feedback and may even invest in your firm. If you’re fortunate enough to attend school in an urban area where there are startup meetups, attend them (checking on Meetup.com is a good place to start). These are great places to get the “inside scoop” on what’s happening in the startup scene, and often really important insider info on if there are unscrupulous operators that you should avoid—especially important for female founders—and you can find a good mentor! As an upside, there are often subgroups focused on underrepresented founders, immigrant founders, first-generation collegiate founders, etc. These can often be useful places to get additional advice. Work with your professors to invite high-quality founders, investors, and other executives to visit campus or Zoom in for lectures. Reach out to alumni on LinkedIn—they’re often loyal to the school and more likely to take time out from their busy schedule to inspire the next generation. Attend hackathons, and if there aren’t any being run in your area—start one! You don’t have to be a skilled developer to participate in a hackathon, but these events are a great way to meet other potential founders and perhaps even bang out a quick prototype and get feedback. Again, if you organize a hackathon, get high-quality industry experts—executives, founders, and venture investors—to judge ideas that teams present at the end. And spend time hanging out where tech students linger—computer labs and maker spaces, and the “tech floor” if your university has themed student housing. If you are fortunate enough to be studying in an urban area where startups and investors are close by, organize field visits to those firms. I’ve run weekly Friday afternoon TechTreks at my university, taking students on field visits to area startups, as well as the offices of venture investors and large tech firms. Contact alumni first, but if you want to reach a firm where alums don’t work, try contacting the HR office. Many are often quite excited to have bright, enthusiastic students learn more about their companies. And if you’re not a tech student, be sure to bring the techies (or sponsor this through a technical organization like an information systems, computer science, or engineering club). Techies are so hard to hire that few firms say “no” when tech firms want to stop by. And if you do visit a firm or have a speaker stop by, make sure that you and all of your colleagues do their homework. Read up on the firms and the people you are visiting with. Visit their websites, download and try their apps, visit their LinkedIn pages. Know the market and competitors. Nothing turns off speakers more than a room full of underprepared students. And nothing gets their attention more than someone who has over prepared and shows real interest with thoughtful questions that offer substantive advice.
The most important part of the recommendation above is to start building product. If you’re not a technical cofounder, then find one, or even better, gain tech skills. Very few startups succeed thinking they can simply “outsource development” to some coders they hire. Having tech skills in-house is essential for the nimbleness you’ll need to quickly refine product to market needs (we’ll discuss product–market fit later in this book). A good test to see if you have the stomach to be a tech entrepreneur is to see if you can handle a technical course. Building a startup will almost certainly be the hardest thing you’ve ever done, and if you can’t get through a semester of coding, you might need to strengthen your stamina and tenacity before trying to create a firm. You don’t necessarily have to take a university course to learn tech like how to build a high-quality website or robust app. There are plenty of online courses, many of them free (I even have all materials for my iOS course free, online (refer to the YouTube channel, John Gallaugher), just please don’t expect me to be able to offer tech support or answer technical questions). Start early. Freshman have four years to skill up, but the longer you wait the less time you’ll have to begin building what you want. This doesn’t mean a founder needs to be the CTO, but if you have skills to build a prototype, it’ll be easier to recruit other technical cofounders and build a tech team. Remember, many talented tech students are already working on their own projects or may be working for others. Someone with an impressive prototype is far more persuasive than someone wind-bagging about a hoped-for product or service. Also, most founders don’t know what they don’t know, so having a working prototype will help shape questions on technologies, platforms, design and architecture, and more.
And don’t make some of the common mistakes of green, collegiate founders. Spending a lot of time on a “pitch deck,” logo design, or seeking funding is a almost always a sign of a “wantrepreneur” rather than an entrepreneur. Do understand the golden triad of entrepreneurship: 1) there’s a problem, 2) I can solve the problem, 3) and I can be paid by solving the problem. If you take a good entrepreneurship course or read broadly (The Lean Startup methodology by Eric Reis is particularly popular, but there are also many free resources you can find online), you may learn important concepts (also covered in this book), like build products and platforms, not features; build businesses that scale; ensure that you have product–market fit, etc. However, firms will make a lot of changes once they can get real product feedback—redefining products, markets, and more. Spending hours on a business plan is less helpful than many think. Instead, roll up your sleeves and start building a real product or service! Also, never ask someone to sign a non-disclosure agreement. You’re almost certainly not the only one in the world working on an idea, but winning ideas are those that are translated into desirable products, and doing that usually involves iteration through feedback. Despite what you might have seen in the movie The Social Network, you’ve got much more to gain as a founder by sharing your idea, getting feedback, learning from potential customers, and improving your work. Also (and this is key) no reputable venture investor will ever sign an NDA—asking an investor to do this will make you look terribly uninformed and decreases the chance you’ll be taken seriously. Successful founders are almost always focused on building something that addresses need. Investors want to see this. And it’s best to show up after you’ve gotten feedback from real customers that you’re on to something.
That said, understand many entrepreneurs fail in their first efforts, and many who are successful end up pivotingIn product development and entrepreneurship, this involves significantly redefining the market, business, and/or product offering.—significantly redefining the market, business, and/or product offering. Few understand they need to pivot until they start getting customer feedback and testing markets. And even if you do fail, early failures may help you learn so that you’ll increase your likelihood of future successes. Students who build real products likely learn many things they wouldn’t in class alone. They’ve got something they can show potential employers (perhaps prototypes that are on GitHub, apps to download, or websites to visit, which all become part of one’s technical portfolio). Communicating with potential customers, collaborating with an early founding team, and pitching your ideas in university events all help develop soft skills that are vital—confidence, maturity, communication and persuasive skills, and more.
None of this means you should completely ignore the things you’d learn in an entrepreneurship course. You’ll eventually need to speak to a lawyer. Many university law schools have pro-bono programs where law students can draft simple founding documents, and when things get serious and you’re on your way to raising money, you’ll want to speak with an experienced startup attorney. Experienced venture investors can help you walk through the process. Take a look at the firms they’ve backed. Are there several successes? You can and should reach out to successful and failed startups backed by an investor to vet your money before you commit. Also, consider if a startup accelerator is right for you. The most successful startup accelerators are very competitive, and if selected you usually participate in a residency program (on average about three months) where firms receive mentorship from founders and experienced investors. These programs usually provide some very modest seed capital in exchange for a small ownership stake. After the program is done, startups then pitch their products in Demo Days, where investors are invited to see early-stage firms and typically follow up with the most promising ones. I’ve seen students have successful experiences with several accelerators, including Y-Combinator, TechStars (there are many versions in several cities worldwide), the A16Z SPEEDRUN game accelerator, and MassChallenge (which is entirely nonprofit and doesn’t even take an equity stake). Not everyone benefits from an accelerator, so evaluate your needs and the potential benefits and trade-offs if you’re offered an accelerator slot. Also beware. Just as there are “wantrepreneurs,” there are wanna-be investors that may have started programs, suckered someone into offering a small amount of funding, but otherwise don’t really offer much value. The term “dumb money” is often used to describe an investor who buys into a stake in your firm but lacks experience, connections, or other resources to really make their investment pay off. I’ve seen many young investors jump at a no-name accelerator or work with low-quality investors simply because they feel like this is a win—they got admitted or got a term sheetA legal document that is the agreement between a founding firm and its investors. It defines investment terms, ownership stake, board membership if offered, etc.. If you can, it’s almost always better to build a strong product and seek money from more successful investors, perhaps even at a smaller stake, than take early money from someone who is “all hat, no cattle” or who doesn’t have much to show except a bunch of no-name investments that have never really paid off for founders. Also be careful accepting money from friends and family. I’ve seen several excited young entrepreneurs talk a good game and get “uncle and grandma money” only to greatly regret they accepted investment from a relative who had visions of backing the next Zuckerberg, when they were really backing nothing but hopes and dreams.
Finally, think about your goals. Successful founders want to build something and make a difference. Founders that are thinking about the “exit” (often selling out to another firm) are far less attractive than those who are focused on building real products and services that tackle real problems. There’s a lot more to learn, and most of the lessons that apply to business success that are covered in this book are also highly relevant to new and growing ventures. Seems like a journey you’re up for? Go for it! And when you’re successful, be sure to return to your university and share your insight with the next generation. Who knows, maybe I’ll be including your name in the list above some day!
How to Get into Silicon Valley’s $600 Billion Startup School, The Circuit with Emily Chang
Y-Combinator is the world’s most elite and most selective startup accelerator. Not all Y-Combinator firms are started by young people, but many of the firm’s most successful startups were founded by twenty-somethings. Alumni include founders of Airbnb, Reddit, Stripe, and WePay. Sam Altman of OpenAI is an alum for his less successful startup, Loopt, but went on to run the firm, then head OpenAI. Refer to this video of Emily Chang interviewing Garry Tan, the current CEO. While you should get inspired by young startup leaders, also realize starting a business is extraordinarily difficult, and even firms that have elite mentors and a Y-Combinator backing are likely to fail.
Key Takeaways
Recognize that anyone reading this book has the potential to build an impactful business. Entrepreneurship has no minimum age requirement.
The ranks of technology revolutionaries are filled with young people, with several leading firms and innovations launched by entrepreneurs who started while roughly the age of the average university student.
Several forces are accelerating entrepreneurship and and lowering its cost. These include crowdfunding, cloud computing, app stores, AI, 3D printing, and social media, among others.
University may be the best time to start a startup, and there are many things a would-be entrepreneur can do to learn while completing their degree. Lots of advice and things students can do now are offered in the preceding paragraphs.
Founders are served well by relentlessly focusing on building, testing, and refining product. The (relatively speaking) low-risk time one spends in college can help clarify if an idea is a bad one or if founders have built something worth their time, investors’ money, and customers’ use/purchase/subscription.
There are many additional ways one can refine their product after college. Many founders have benefited from accelerator programs or by accepting investment from seed and early-stage investors; however, the quality of programs and investors vary widely. Don’t rush into a commitment without doing homework and understanding if anything gained is worth the tradeoff.
Questions and Exercises
Look online for lists of young entrepreneurs. How many of these firms are tech firms or heavily rely on technology? Are there any sectors more heavily represented than tech?
Have you ever thought of starting your own tech-enabled business? Brainstorm with some friends. What kinds of ideas do you think might make a good business?
How have the costs of entrepreneurship changed over the past decade? What forces are behind these changes? What does this mean for the future of entrepreneurship?
Many universities and regions have competitions for entrepreneurs (e.g., business plan competitions, elevator pitch competitions). Does your school have such a program? What are the criteria for participation? If your school doesn’t have one, consider forming such a program.
Research business accelerator programs such as Y Combinator, Techstars, and MassChallenge. Do you have a program like this in your area? What do entrepreneurs get from participating in these programs? What do they give up? Do you think these programs are worth it? Why or why not? Have you ever used a product or service from a firm that has participated in one of these programs?
Explore online for lists of resources for entrepreneurship. Use social media to share these resources with your class.
Why are we in the “golden age” of technology entrepreneurship? What factors are helping entrepreneurs more rapidly achieve their vision, and with a lower cost?
Have any alumni from your institution founded technology firms or risen to positions of prominence in tech-focused careers? If so, work with your professor to invite them to come speak to your class or to student groups on campus. Your career services, university advancement (alumni giving and fundraising), alumni association, and LinkedIn searches may be able to help uncover potential speakers.
Some instructors may have students work on individual or group projects as part of the class. One option is to plot a startup and justify it based on concepts learned in this textbook and in your course. Work with your instructor to identify judging criteria and pitch your idea to classmates and perhaps others in the university or outside investors, as well.