I just finished reading Founders at Work by Jessica Livingston of Y-Combinator. The book consists of Q&A sessions with founders of wildly successful IT companies including (Hotmail, 37Signals, Tivo, Flickr, Gmail, Apple, Adobe, etc). Three key lessons stood out to me:

1) The Team is More Important Than the Product

Many “great” companies don’t know what they’re going to build in the beginning. They just are smart, hard-working people that know they want to build a great company. The product that becomes their big hit, is often not the one they planned to build.  Here are few examples from the book:

• Flickr started out creating online games and the photo-sharing was just something they built as an add-on to their game
• 37Signals was a design shop that created basecamp as an internal app to track their projects
• Paypal was a seller of crypto software for handheld devices. In fact they created something like five different types of products before settling on becoming the transaction middle-man.

2) Build a Customer Base First

This may be specific to internet companies, but many of them started with a plan to build as big a user base as possible before really trying to monetize their product:

• Fog Creek Software built a huge following from Joel’s widely read blog Joel On Software which turned into the majority of their first customers. 37Signals did much the same thing of transferring readers of their blog into paying customers.
• Hotmail (which was a 2-person startup that Microsoft bought) focused solely on getting the most people using their system because they knew that the idea of web-based email would catch on and the barrier to building a competing system was very low. So they correctly assumed that if they could build a large user-base then no one could catch them.
• Hot or Not followed pretty much the same model. Once they released the site, they started to tell all their friends and it went viral. After they had a billion page views it was pretty easy to monetize, and even if someone created a competing site, it didn’t matter because they had all the eyeballs.

3) Don’t Compromise

As a founder or startup many people will tell you that you are crazy to leave a high-paying job and forge into the unknown. Also, if you are creating a truly new product it will by definition seem unrealistic to many others. The founder of blogger.com (which got bought by google) put it best:

I think one of the things that kills great things so often is compromise — letting people talk you out of what your gut is telling you. Not that I don’t value people’s input, but you have to have the strength to ignore it sometimes, too. If you feel really strongly, there might be something to that, and if you see something that other people don’t see, it could be because it’s powerful and different. If everyone agrees, it’s probably because you’re not doing anything original -Evan Williams, founder of blogger.com

-Bryant