Vision and Talent or Planning?
In 2005 Paul Graham, Jessica Livingston, Robert Morris, and Trevor Blackwell started Y Combinator. Since 2005 Y Combinator has funded over 2,000 startups, including Airbnb, Dropbox, Stripe, and Reddit. Yet, Paul recently said this:
I have never read a business plan or a balance sheet.
— Paul Graham (@paulg) February 13, 2022
This Tweet caused a fair bit a controversy and surprised a lot of people.
There used to be endless arguments about whether a startup should have a formalized written business plan. Business schools taught all the MBAs to write them, and everyone used to argue about whether a startup ought to have them.
Today I’m not aware of any VC or investor that requires/wants a business plan, almost everyone has settled on a standard pitch deck if anything (though one-page ‘memos’ are becoming a thing). A few business schools somehow still tell you to create a business plan if you want to raise VC, but they seem to be outdated.
Here's the real reason Paul Graham doesn't read business plans or care about balance sheets:
"The reason I don't care ... is the same reason I don't care who's leading 100 yards into a marathon."— Paul Graham, Y Combinator
At that stage are you betting on the runner with the best "plan" or the runner with the best talent, hunger and vision? Early stage companies evolve rapidly, whatever plan they have at the start is likely to change rapidly and potentially dramatically.
YC is trying to focus on finding good teams under the assumption that a strong team that can execute well has a higher chance of success than a worse team with a better starting plan. The information they need is:
- What are you doing?
- Do people like it?
- What are you and the team like?
- How big is the market?
What stage is your organization? Even large incumbents can think and act like early stage organizations (although they rarely do). What is your company focused on? Vision and talent, or the plan and balance sheet?
Image Credit: Eliud Kipchoge
Eliud Kipchoge is a Kenyan professional long-distance runner who is the 2016 and 2020 Olympic marathon winner. In addition, he set the world record in the marathon with a time of 2:01:39 at the 2018 Berlin Marathon. He is considered by many as "the greatest marathoner of the modern era." Even 100 yards into a marathon I'd bet on him!