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Daily · Founders' essays

Default Alive or Default Dead?

Paul Graham · essay, 2015·5 min in the original·original at paulgraham.com
The 30‑second versionthe original, distilled5 min → 25 sec
  • Ask the question early. Default alive means current growth outruns current spending to profitability; default dead means it does not. Graham finds most founders simply do not know which they are.
  • The answer changes everything. A default-alive company can take risks and say no to bad terms; a default-dead one is negotiating for its life without realizing it.
  • Overhiring is the classic killer. The essay names hiring too fast as the main way promising startups make themselves default dead, often to look like a winner.
  • Beware the fatal pinch: default dead, low on cash, and unable to raise. By then the options have mostly disappeared, which is why the question exists.
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Why it earns a slot

The five-minute essay that has saved more startups than most accelerators. The question still gets asked too late.

One question determines a startup's strategy: at current growth and spending, do you reach profitability before the money runs out? Most founders cannot answer it, and the ones who ask too late meet the fatal pinch: default dead, plus investors who no longer want to help.

This distillation is written from the freely available original, which is always the better read when you have the time: paulgraham.com.

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