Fledgling founders entering a three-month residency at Y Combinator often start their term with a bang: Brian Chesky, the cofounder and CEO of Airbnb, fires off an inspirational speech. His company, of course, started with three nobodies going through the program. This year, Chesky topped himself. Y Combinator cofounder and nonresident guru Paul Graham (who years ago traipsed off to England and turned the enterprise over to a series of CEOs) reports that the talk so dazzled the budding tech moguls, alumni, and top investors that some were calling it the best talk they ever heard. It moved Graham to double down on a view he has had for many years—that founders are a superior form of humans. He published an essay on his thoughts entitled “Founder Mode.” People haven’t stopped talking about it since.
Specifically, Graham was moved by Chesky’s confession that during Airbnb’s rise, he listened to the investors who told him he needed professional management to help direct the company’s growth. His instincts told him otherwise, but he gave in and took the advice to (as Graham puts it) “hire professional fakers and let them drive the company into the ground.” In Graham’s view, there are two types of executives, founders and managers, and the latter are mostly frauds. Only when Chesky cast out the fakers could he reestablish control of his company. Chesky did it, he said in his speech, by asking himself what Steve Jobs would do. Jobs, of course, is on the Mount Rushmore of founders, along with Mark Zuckerberg, Jeff Bezos, Larry Page, and Bill Gates. One thing Steve Jobs did was hold “skip level” meetings where bright people low on the org chart were included over their managers. Who were presumably fakers and certainly not founders!
Graham’s essay triggered a huge response. Some people saw it as a dangerous ode to micromanaging. Others used it as an excuse/opportunity to rant about entitled billionaires. Memes sprang up. One guy, undoubtedly a founder, used a fast-merch service to sell founder-mode hats and mugs.
It’s a little baffling why this nerve was so strikingly hit in 2024. The trope of the almighty founder has been around for decades. It’s been a main pillar of Y Combinator for almost 20 years. VCs have long opined that success comes not so much from assessing business plans but from identifying the next superstar founder, who might be spotted slouching into the partner meeting in a filthy hoodie. Ben Horowitz, the cofounder of VC firm Andreessen Horowitz, has written two popular books where every page assumes the reader is tuned in to the premise that founders abide. (Sample chapter title: “First Rule of Entrepreneurship: There Are No Rules.”)
There’s something to this. Chesky is a good example. I first met him at a party in January 2009, when he and his partners were just starting the YC program. Graham made it a point to introduce me to him and gushed that he was one of the purest versions of a founder he’d encountered. When Chesky heard I was going to Barack Obama’s inauguration later that month, he tried to convince me to use his service to crash on some stranger’s sofa, an offer I had no trouble turning down. The experience didn’t lead me to believe he’d build a $75 billion company that I would actually wind up using.
I had forgotten that when technology takes giant leaps, the impossible falls into reach and that the best means of drawing value from that sudden disruption all sound crazy, but decidedly are not. Search the entire internet in under a second? Get a car to pick me up with a tap of the phone and not fumble for payment? Become the world’s biggest bookstore without a maze of shelves to browse? It takes a certain talent to not only understand what’s possible, but be stubborn enough to pursue the idea when everyone tells you that it’s insane. I think that’s what Graham cherishes when he talks of founders.
It’s also true that when one of those groundbreaking companies matures and faces challenges, a founder has a unique ability to make bold moves and stick to the original vision when others urge a less risky course. There are certainly cases where companies struggled when founders were replaced by managers. Remember Yahoo? And of course there’s Apple, where the founder returned and restored the company to its former glory and beyond.
But there are abundant counterexamples as well. Apple isn’t exactly struggling under Tim Cook. And consider Microsoft. Its CEO since 2014, Satya Nadella, had been a company lifer, slogging away in various divisions since 1992. Not a founder, nope. But he’s taken the company to new heights. Though Bill Gates is still revered at Microsoft, no one in the company wants him back at the top.
And god knows, there are plenty of cases where it wasn’t management fakers but stubborn founders who drove a company into the ground. My guess is that Travis Kalanick might have benefited from listening to stodgy managers. His replacement, a management type of dude, has made Uber profitable.
The fact is, not everyone is Brian Chesky, and no one is like Steve Jobs. The vast majority of companies never take off, and instead fade into ignominy. Very few founders get to the point where investors demand that they retain adult supervision to manage growth, because only the rarest of companies get to that point.
It’s fun to talk about founder mode, maybe for the same reason that some of us read Ben Horowitz’s founder-porn texts with our noses pressed to the window. Founder mode, which Graham predicts will one day get its closeup in management texts, really applies only to the most exceptional founders, the ones Steve Jobs once described as “the crazy ones.” Their companies aren’t called unicorns for nothing.
Time Travel
In 2007, I embedded in a Y Combinator batch of 12 companies. (Starting next year there will be four batches a year, with hundreds of startups.) It was clear even then that Graham, who was extremely hands-on, had developed his views on the primacy of founders. My story ran in Newsweek under the headline “Boot Camp for Billionaires.”
Every Tuesday during the program, Y Combinator hosts a dinner of chili or stew for the start-ups. At this first one, Graham and [cofounder Jessica] Livingston distribute gray T shirts emblazoned with one of Graham’s pithiest admonitions, MAKE SOMETHING PEOPLE WANT. A second, black shirt is bestowed only to start-ups that achieve a “liquidity event”—a purchase by a larger company or an IPO. It reads, I MADE SOMETHING PEOPLE WANT.
Y Combinator’s model dovetails perfectly with the new start-up ethic in Silicon Valley. It’s dramatically cheaper to start a company now than it was in the dot-com boom, and possible to build a substantial operation before requiring venture capital or achieving that liquidity event. (To pay salaries and costs during that time, one can get “angel funding”—less money than a VC firm pays, but in exchange for less equity.) Software tools, which used to cost hundreds of thousands, are now largely free. A wide variety of tasks can be outsourced cheaply. Computers, servers, bandwidth and storage cost a fraction of what they did a decade ago. And there’s no need for a marketing budget when you’ve got Internet word of mouth.
As a result, when it comes to funding, “$500,000 is the new $5 million,” says tech investor Mike Maples. It’s several weeks into the program, and Maples is in a Palo Alto, Calif., coffeehouse for a meeting with the Weeblies. [The founders of Weebly, a company later acquired by Square for $365 million.] He sees a lot of people barely out of their teens. The old wisdom for investors in start-ups said you needed an experienced hand as a CEO. The Valley’s new wisdom: don’t fund anyone over 30. The average age of Y Combinator founders is 25.
Ask Me One Thing
John asks, “Is there anything about cryptocurrency that would prevent the Trump camp from issuing a completely fraudulent coin that is purely speculative Monopoly money? Or is there any way for the blockchain to guarantee some underlying inherent value?”
Thanks for the question, John. I’m not a lawyer or an expert in regulation, but as far as I know anyone can create a cryptocurrency that is, in effect, speculative Monopoly money. Digital money is worth what people are willing to pay for it: Ever notice how Bitcoin, the Cadillac of digital currencies, rises and falls like a soufflé? A speculative nature doesn’t necessarily mean that a new currency is fraudulent, which is a specific kind of criminality. In any case, we really don’t know much about the actual specifics of Trump coinage. The Securities and Exchange Commission has been making it a point to make sure that issuers of digital money don’t misrepresent themselves. I’m sure that if Mr. Trump is reelected, he won’t meddle in any regulatory procedures. (Cough.)
As for your question about the blockchain guaranteeing inherent value—well, no. The blockchain is all about verification. It can affirm who owns a chunk of some cryptocurrency, but that has no bearing on whether the owner has been suckered into holding something of no worth.
You can submit questions to [email protected]. Write ASK LEVY in the subject line.
End Times Chronicle
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