A guide to startups by a student who invests in fellow students

As a #RecessionGraduate and someone interested in startups and startup investments, I’ve recently been thinking a lot about my career choices and what it all means, given everything that’s happening.

Photo credit: Iris Wang

I’ve also been working on an investment thesis on student-founded startups at Protege Ventures. And while this is intended as a guide for picking startup investments, I apply this personally when thinking about starting up. After all, deciding which idea is worth committing the next five to 10 years of your life to build is an investment in itself.

Why students?

The reason for the rising interest in student startups may seem obvious – Microsoft, Google, Facebook, and Tencent were all founded by people who met in school. The average age when the founders of the world’s seven most valuable companies (which all happen to be Big Tech companies) first started was 25.

Paul Graham, founder of accelerator Y Combinator, saw his fair share of startups founded by 20-somethings. In A Student’s Guide to Startups, Graham’s seminal essay that inspired this piece, he identified five key advantages that young founders have over their older peers:

• Stamina
• Poverty
• Rootlessness
• Colleagues
• Ignorance

As you age, your living costs and opportunity costs increase. You have jobs that are too comfortable to leave, and you’re less likely to find people who can echo you: “That’s a brilliant idea! Let’s do that!”

Of course, being a young founder is not without disadvantages. In fact, a Harvard research found that the average age of a successful startup founder is 45. Fortunately, venture capitalists are presented with a large set of young founders, and the game we are interested in here is not the average but the outliers. Hence, a more relevant question to ask is, “Which student founders are most likely to succeed?”

Which students?

The two major disadvantages that Graham pointed out and I paraphrase here are:

1. Habits leftover from childhood (and education in general, I might add)
2. A lack of work experience

The core benefit of aging is that you get more time interfacing with the “real world.” The first effect of this is that you begin to learn the mechanics of different industries, organizations, and people. The second effect – and perhaps a more profound one – is that you gradually rid yourself of all the lies that adults have been telling you.

Lies? Yes. For most of us, the world we’ve experienced so far is probably a little nicer or simpler than it really is. Our parents and teachers usually have good intentions, but unfortunately, they don’t give you the list of lies they’ve told you when you graduate.

While I don’t have that list either, Graham did talk about some of the lies in explaining what goes wrong with young founders.

From Y Combinator’s experience, startups by young founders fail because they look like classroom projects. Compared to real startups, classroom projects lack two things: an iterative definition of a real problem and intensity.

What business?

Now