In 1995, Graham and Robert Morris founded Viaweb, the first application service provider (ASP). Viaweb's software, originally written mostly in Common Lisp, allowed users to make their own Internet stores. In the summer of 1998 Viaweb was sold to Yahoo! for 455,000 shares of Yahoo! stock, valued at $49.6 million. At Yahoo! the product became Yahoo! Store.

He has since begun writing essays for his popular website paulgraham.com. They range from "Beating the Averages", which compares Lisp to other programming languages and introduced the word Blub, to "Why Nerds are Unpopular", a discussion of nerd life in high school. A collection of his essays has been published as Hackers and Painters by O'Reilly.

In 2005, after giving a talk at the Harvard Computer Society later published as How to Start a Startup, Graham along with Trevor Blackwell, Jessica Livingston and Robert Morris started Y Combinator to provide seed funding to startups, particularly those started by younger, more technically-oriented founders. Y Combinator has now invested in 118 startups, including reddit, Justin.tv, loopt and Xobni.

BusinessWeek included Paul Graham in 2008 edition of its annual feature, The 25 Most Influential People on the Web. Graham has a B.A. from Cornell. He earned an M.S. and a Ph.D. in Applied Sciences (specializing in computer science) from Harvard in 1988 and 1990 respectively, and studied painting at Rhode Island School of Design and the Accademia di Belle Arti in Florence.