Y Combinator’s Paul Graham Unleashed ‘Founder Mode.’ The Tech World Has Some Thoughts

By Sam Blum, Senior writer @sammblum

Founder mode or manager mode? It turns out that a little bit of both might be the best mix.

Nothing churns the waters in Silicon Valley like an edgy blog post.

An essay by Y Combinator co-founder Paul Graham is sparking debate about managerial philosophies in tech this week. The piece examines what the famous investor calls “founder mode.” It occurs when startup founders are heavily involved in most, if not all, daily operations of their companies. The other side of the organizational duopoly described by Graham is manager mode, which adheres to a Stanford business school approach: delegating to subordinates and hiring the best people so they can do their thing.

Graham cites Airbnb founder and CEO Brian Chesky as the best example of the founder mode mantra in practice. Chesky is a proponent of founder mode, having hinted as much at a Y Combinator event last month.

The piece admonishes venture capitalists for trying to manage companies without any idea of how to actually grow a business (it’s worth noting that many VCs have founded and grown companies). It excoriates business schools for not knowing that founder mode exists, despite Graham’s first introducing the concept in last weekend’s titular essay.

So what do investors and founders think of Graham’s piece, which basically argues that VCs are meddlesome busybodies who often stymie founders’ genius?

“To be a successful founder and raise millions of VC dollars, you have to be a bit of a narcissist and sociopath to continue succeeding,” Brian Gong, a senior associate at Cameron Ventures, explains. Gong, for his part, thinks a healthy mix of both modes can go a long way at the right time. The calculus changes between founder mode and manager mode when a company grows beyond 100 employees, he says. “In the early days of a startup, founder mode is the right management style,” Gong argues, but once you get to a certain point in the lifespan, a managerial approach makes more sense. “Founders should still be involved in significant decision making and hold the final vote on things but need to learn to delegate.”

For Nabeel Alamgir, founder and CEO of the NYC-based Lunchbox, maker of a software platform for restaurants, the founder mode essay was vindicating. “The sentence ‘hire great people and get out of their way’ is one of the biggest lies ever told,” Alamgir tells Inc. A first-time founder in 2019, Alamgir thought hiring a bunch of C-suite executives, some of whom were introduced by investors, would give him a leg up on competitors. It was classic manager mode folly, apparently: Alamgir says relying on so many managers led the company astray. The higher one gets in the C-suite, the “more performative and amazing they are at telling you what you want. They know exactly what you want to hear. They’re better at the interview process than any other part of their job,” he says. In 2021, Lunchbox had raised too much money and overhired, forcing Alamgir to lay off 100 employees. Hiring the managers and ultimately cleaning up the mess was entirely on him, he explains, but the problem stemmed from listening to bad advice.

While the essay may have forced Alamgir to relive bad memories, it also sparked internet jokes. It gave many tech dudes license to promote their own corporate edicts, even if nobody asked for them.

Maybe most significantly, the piece “articulated something that thousands of founders already knew to be true but weren’t sure how to put into words,” Jared Friedman, a Y Combinator partner, wrote on Monday. Graham’s words were somewhat ethereal, if anything. He describes founder mode as if it’s an elusive plane of consciousness that can be achieved only with Zen-like clarity. “Whatever founder mode consists of, it’s pretty clear that it’s going to break the principle that the CEO should engage with the company only via his or her direct reports,” he writes.

However revolutionary it might become, founder mode has not been realized by the vast majority of founders. Steve Jobs apparently understood founder mode before it had a name: Graham writes that Chesky overcame horrible investor advice by studying the way the late Apple founder ran his empire. Now “Airbnb’s free cash flow margin is among the best in Silicon Valley,” he writes. Airbnb’s stock price is down 17 percent from its 2022 IPO.

Another reason Graham’s piece may have resonated: It lambasted corporate bureaucrats. But not everybody gushed over it. “Reverence for founder mode can be misplaced. It’s easy to say founder mode is better because the word manager is just uninspiring,” Anna Barber, a partner at the venture firm M13, tells Inc.

Even though Graham suggests that founder mode isn’t new, not everyone has been feeling its invisible frequencies and abiding by them.

“I operate in a mode that I think is better. I call it ‘divide and conquer’ or ‘trust and delegate,'” Diane Yu, co-founder and CEO of online mortgage platform Tidalwave.ai, explains. “Hire the people who can do a better job than you do for an aspect of the work, observe firsthand how they are doing a better job.”

There is a time and place for both modes, Alamgir concedes. “The trick is knowing when is the founder’s moment and when is the manager’s moment,” he says. Unfortunately, the internet rarely conveys things so clearly.

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