Digests of Paul Graham's posts


Default Alive or Default Dead?

Address: Default Alive or Default Dead?

In this post, PG explained the most fundamental metric to evaluate the status of a startup by looking at expenses and revenue growth, and surprisingly, half of the founders are not aware of this metric.

Therefore, he suggested:

  • Instead of starting to ask too late whether you’re default alive or default dead, start asking too early.

And he pointed out the fatal pitch of startups:

  • The fatal pinch is default dead + slow growth + not enough time to fix it.

And he suggested to avoid the fundraising trap:

  • It would be safe to be default dead if you could count on investors saving you.

  • So no matter how good your growth is, you can never safely treat fundraising as more than a plan A.

  • You should always have a plan B as well: you should know (as in write down) precisely what you’ll need to do to survive if you can’t raise more money, and precisely when you’ll have to switch to plan B if plan A isn’t working.

One of the biggest mistakes that startups may have is that:

  • Hiring too fast is by far the biggest killer of startups that raise money.

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