Just finished reading Zero to One for a second-time, and it was interesting to see that Peter Thiel's contrarian approach to investing in startups ("What valuable company is nobody building") is very similar to PG's thesis that "all good ideas look like bad ideas to begin with (black swan investing) [0]
It will be even more interesting to see if their combined insights and approach can increase their chances of identifying these rare black swans.
Regardless, this has to be among the most formidable grouping of startup talent and brains in the valley.
I'd still love to hear Peter Thiel and PG duke it out/reconcile the "choose an idea that avoids competition at all costs" vs. "don't worry about competition at all" messages.
You could look at them as two sides of the same perspective: Paul is saying basically that competition doesn't exist because if you focus on the customer need enough it ensures uniqueness, and Peter is saying don't copy what someone else has done, be unique.
Zappos is not unique. They don't have a monopoly on anything and ultimately sold out to Amazon probably because there wasn't a way to grow much beyond their market of people who pay premiums on everything to get easier returns.
I think competition on a "macro" scale isn't what counts, it's more the competition at any given moment in the user's story.
When they hear about it or get the invitation, do they get it via a medium filled with a lot of spam?
When they follow the invitation, and see your service for the first time, will they go through the onboarding process?
After they complete onboarding, will they have a compelling reason to come back? Such as transactional notifications?
If they come back, will they form a habit in their mind of using your service for something? This is the "mindshare" that you are fighting for, that is the level on which competition really matters. How do you position yourself?
What network effects, social proof and social convenience / pressure will cause the person to use your service?
What are your customers currently paying for that you can do better / cheaper?
I think they are not necessarily mutually exclusive, just different ways to look at things. A good marketer can "invent" a new area of competition where you are the leader.
Thus, one aproach is to tackle this problem at the start, the other is to tackle this problem later on.
Taking a contrarian viewpoint. Does the convergence of all talent into one team actually reduce the innovation in the startup ecosystem. Similar to your sports analogy, the best games result when multiple talented teams fight it out. If all startups that become big are YC-funded, then we might see just the YC-influenced style of running a company whereas other models may not see the light of the day.
But it's not competitive in the same way sports are. If you're a basketball team, you only succeed by beating other basketball teams. If you're an investor, beating other investors isn't the definition of your job. It might happen incidentally, but not by definition.
Funny that you make a sports analogy here. I wonder if the partners see themselves as players or coaches. After listening to Scott Kupor from a16z talk, I know that they see themselves as a talent agency rather than being directly involved in the "sport".
The world would benefit much more from him starting a worthy alternative to YC. Few others are in a position to do so. He probably thinks there would be no profit in competing against what he sees as YC's monopoly.
Well, as above, he did say "choose an idea that avoids competition at all costs" and joined YC thus avoiding competition by joining.
PG's "don't worry about competition at all" rings true by bringing Thiel in and allowing a competitor in a way see how a top performing product runs on the inside.
Who says Thiel isn't just gaining more knowledge to start another one later, then YC and Thiel can have a federation.
> Well, as above, he did say "choose an idea that avoids competition at all costs" and joined YC thus avoiding competition by joining.
Following your reasoning there should be no tech startups and everyone should join Google, Facebook regardless of the particularly of each business/industry. Not all incubators/accelerators are targeting the same demographics. Thiel could create one that is completely orthogonal to what YC is doing as of today.
I agree with you and I made a provocative comment I knew was going to be downvoted. But at least I expected some people to voice a contratrian opinion. Thank you for you straightness
There's nothing profound about it, it's common sense in business though people use different words like "moats", "barriers to entry" and "pricing power".
Well it doesn't help that the startup world thumbs their nose at MBAs and seems to really want 26 year old founders. Inexperience + disdain for the very education that teaches that kind of thinking leads to a pretty obvious conclusion.
> one of the most profound insights in Thiel's excellent book, Zero to One.
Which was an insight in Blue Ocean Strategy (Kim & Mauborgne, 2005).
And before that, if you squint, in Competitive Strategy (Porter, 1980) and Competitive Advantage (Porter, 1980).
And the B-school theorists basically got their ideas by peeking over the fence of the Economics dept at how monopolies are formed and abuse their power and saying "hey, let's teach that to our students".
It's becoming a powerhouse and that usually causes problem in the long run if the chemistry isn't present. Or say the need to be hungry enough to attain goals (just like a strong sports team losing against a lower tier team, aka the underdog).
Yes, surrounding yourself with smart people is great, but surrounding yourself with hungry people is another.
Attract the best people for building YC companies, yes. Although that is sort of a self fulfilling prophecy. There is so much amazing talent outside of YC or even SV it is incredible. Just have to know where to look.
I hope Peter encourages start-ups in longevity and nootropics.
Or just nootropics. If there's more smart people then additional anti-ageing tech will follow—since all arguments against said tech are fallacious; even if they seem reasonable prima facie!
Nootropics user here. I would love for this field to go from amateur hobbyists to something more organized. The difficult part remains quantifying results
Testing substances on healthy humans is a big deal. At the moment nootropics are used only in disease models.
Also, the creation of nootropics which offer greater upgrades to cognition should be a priority. There have been a few promising chemical such as PRL-8-53[0], but when people have tried such chemicals on themselves they haven't lived up to their promise.
> That depends on what actual results you can deliver.
Nothing to do with me. I plan on purchasing the results.
> If it's not very much, that's not a fallacy, it's a demonstration.
Rats' lifespans have been doubled[0]. And there are medications which are used for other conditions being looked at: like rapamycin (or the development of a variant), and metformin.
There are also supplements like the newly released nicotinamide riboside.
Plus, people such as Google (via Calico) are developing treatments targeting the longevity gene FOXO3.
The area is vast. And you've just demonstrated my point. What you've said sounds reasonable, but is actually bullshit.
How is something in medicine proven? It's not with deduction, it's with induction! So nothing in medicine is proven with 100% certainty. What's left is probability! Even as an anonymous nobody, I'm able to point to hints of life extension in humans today, or 100% increase in lifespan of mammals! Or the work being done on various vectors; ranging from the slowing of ageing, via metabolism, to the reversal of ageing!
Then there's something like SENS which has enumerated seven types of ageing. If those seven types of ageing are reversed, then ageing will be reversed. I believe those seven categories are yet to be disproved.
So your statement hints at the science of philosophy, and what constitutes proof. As I've said above, I say probability!
this is not true. an accelerator can do earlier (before team or product or idea); wider (fund literally anyone who can write five pages in English in a timed setting about their idea); lower (take 0.075% for $2k); faster (an SaaS app that wires you a check within 24 hours, after a human lawyer verifies your details and contract); riskier (billion dollar ideas that don't even have the research paper worked out - like a thesis proposal to a professor, only you're a company); insaner (fund things that are literally insane and would make any investor blush to mention it to another investor), and so forth.
It's not hard to be competitive with YC. The thing is, nobody is even trying to be.
All those are valid. One you forgot: YC, like nearly all other accelerators, is implicitly age-ist.
Note that I said implicitly. There is no explicit age discrimination that I am aware of, but the entire program is structured in a way that makes it horribly impractical for anyone who isn't a bachelor/bachelorette and childless. You must move to the Bay Area, put in family-unfriendly hours, and live on a quantity of money that would make it impossible to live in the Bay Area with a family (assuming you don't have a lot of savings, a trust, or a high-earning spouse). It just won't work for a huge majority of older people or people with families.
The implicit assumption is that all the best talent and ideas can be found among those who pass this implicit filter function. Anyone over 25-30 or who has children is "washed up."
... which creates room for an accelerator to test that assumption. What if -- gasp -- people who have been doing this stuff for a long time are actually better at it?
But as you say, nobody is even really trying to compete with YC within their own segment let alone exploring alternative modalities.
Edit: another one would be to question the assumption that sole founders are intrinsically doomed. They are certainly at a disadvantage, but that'd create an interesting niche for an accelerator that helped them to compensate for their disadvantages if they otherwise had really great skills and ideas.
This is absolutely false. It's an absurd thing to say that founders over a certain age are washed up — and it's a lie to say that is something we believe.
Startups move to the Bay Area for three months and go anywhere it makes sense to put their startup afterwards. Many companies even move the founder's families over the three months (easier in the Summer).
I disagree. I have 4 kids, I have been married for 15 and my co-founder had a 3 months old when we did YC. And we are from Portugal, so we were away from our families when we went through YC. It was hard and it required sacrifice, but it was certainly worth it and YC was super supportive. Our lives, and the lives of our kids are much better for it.
Doing a startup when you have kids is (almost) always harder. YC actually makes it easier. Since you are more likely to get funding, you can actually pay yourself at least enough that you don't have to worry if you will be able to make rent. There is advantages to it also. When you have kids you are more aware of the consequences of failing, you value your time more and are less likely to "play house" as PG calls it, in my opinion. We didn't move the family to the US because kids where in school and because they have a better support network in Portugal (granparents, aunts, etc). Regarding the financial success, it depends on whether you care about valuations at this stage which are fairly subjective. In terms of valuation it most certainly did, and since I own stock in my startup, it represented measurable success. More importantly though, the access to better funding and better investors allowed me to have better conditions to focus on growing the company and doing what I love, while providing for my family. Even though we don't have luxuries, the ability to work on something I love without my kids having to feel like they are sacrificing is a luxury in itself.
I would actually go so far to say that if you are doing a startup and have kids, YC is by far your best chance of creating a successful startup without having to go through financial distress. In that sense it is the most family friendly incubator. Having done 4 startups always with kids, I speak of experience.
> When you have kids you are more aware of the consequences of failing, you value your time more and are less likely to "play house" as PG calls it, in my opinion.
Yes I agree with this. I think having kids is kind of training for some aspects of start-up life. Definitely in juggling a lot of things at once with limited time.
In terms of success I just wanted to know if it carried on beyond the YC incubator period and it sounds like it has so well done and good luck with it :-)
Thanks, it certainly did help beyond YC. The YC network is fantastic and I have to say the in general the YC brand open many doors. Both with customers, investors and recruiting. I don't know if you are also doing a startup, but if so, good luck :)
You say you disagree, but your experience doesn't support that.
"It was hard and it required sacrifice." because of the implicit bias brought up by the GP. For someone in their mid twenties, no relationship or dependents, moving for 3 months is no big deal. Good, even.
Yes, it's easier to start a company and take risks when the only person you have to worry about is yourself. This is the case in anything you do whether it's starting a company, traveling, trying to become a professional basketball player, etc. Are you suggesting YC help someone take care of their kids?
I didn't mean to imply that nobody with a family could do this, but that it's structured in such a way as to be strongly biased against people with families/kids. How many others did you see in YC with children?
In our batch there were at least three teams with founders that had kids. I think that what you mean that is that doing a startup in general is biased against people with kids/families. I agree, but that is mostly because living on a smaller budget with kids is harder. The beautiful thing of a startup is that in most cases you work really hard and at the same take breaks in moments where it is important to be there for your kids. YC is structured in a way where during those three months you kind of take a break with your regular life and focus relentlessly on your company, but I believe that doing that is one of the most brilliant things from YC, it makes all the difference in the world for your chances of success.
We're in the current batch, and two of our founders have children. Children aren't the normal topic of conversation when we're meeting other founders, so it's not always obvious.
YC is explicitly oriented toward circumstances which have the highest potential to yield huge upside, and will naturally fund companies that fall into those trends. It seems prima facie obvious that they would not deliberately avoid investing in a group that was likely to outperform.
Who knows? Maybe it's the case that people who put in family-unfriendly hours and live on impossibly low amounts of money are those most likely to survive the rollercoaster of a venture backed startup. On balance, younger founders who have low personal burn / high free time may be better suited to the lifestyle demands.
I'm saying this as a 28 year old, married, solo founder with kids, so this is clearly not always true. However, distributed across 1000's of YC founders and hundreds of startups it's hardly surprising to find a lower age trend.
I think one reason you don't see a lot of older folks applying to YC is not necessarily for this reason. The most talented older people, the ones who would be getting into YC anyway, presumably have been in the industry for 20 years. When you've been around that long, you tend to already have plenty of connections. You're already tapped into the silicon valley network. So why bother going the route of YC if you can already secure meetings with investors without them?
That's an interesting and I think valid point. Older people tend to find it easier to raise money just on their own, make connections on their own, etc. They also have more experience, so they need less mentoring.
Maybe they just don't need accelerators as much, therefore there's no niche for one that caters to that crowd.
Also more skeptical and less willing to hand over equity and control without raw-numbers proof of a significant positive contribution.
The social capital you get from dinners and networking is all very well. But it's not quite enough to provide that proof in an objective business-case sense.
Literally everything is harder with young children. Not just YC. That doesn't mean the world is ageist. That means that parenting is hard work that comes at the expense of your other priorities.
YC believes in the advantages of their current model. There is something to be said for face to face interaction between founders and other founders, and between founders and mentors. It's possible that video or tele conferencing could be just as effective, but apparently they prefer to do business in person.
They've never said, at least publicly, that the best ideas are found among people who are of a certain age or parental status. They have said that they think it's better if all of the startups they fund in a batch are in one geographic location for X number of months. It's a matter of preference, not a moral judgement. Anecdotally, several of the YC partners have families and children of their own. I find it hard to believe that they aren't sensitive to the situation you're describing.
Personally, I think that doing a startup can be very difficult and demanding. It's been known to put a strain on family relationships. I would encourage people with families to think twice and to put in a lot of extra effort in the planning, research and MVP stages. It's one thing for a 20 year old to go through the stress of a startup, it's another when the lives of children are involved. I've seen the experience test people and get the better of them. If I encouraged someone to do that and it caused their family to fall apart, I would feel significantly worse about knowing that negative outcomes are assured for some. That's just me, though.
I don't think that the YC partners see things that way at all. They've found a process that works for them and if it ain't broke, they don't want to fix it.
>Anyone over 25-30 or who has children is "washed up."
This is the price of the otherwise extremely liberal policies of YC. "Ageism," move to the bay area, etc., etc., maybe---but all of that is coupled with the implicit promise that "We won't fuck you over." And the bar for VC's is sufficiently low that that is a surprisingly rare value proposition---no, it's a breath of fresh air.
I'd love to see a competitor (dozens!) to YC arise and fund, like, capital-intensive bio-tech companies in Africa or something, but that's not really what YC is built for. I don't think that it should have to be.
While YC's structure certainly works better for single people in their 20's, I don't think they started with the goal of appealing solely to that demographic and worked backward. They simply tried to create the ideal structure for tech startups to quickly grow (or die before too many resources have been spent on it). It appears that they have succeeded.
The reality is that neither YC, nor the startup world in general, will work for everyone in every life circumstance. You will always have a more difficult road when your personal life imposes constraints upon you that your competitors (in this case, other founders) don't have. But that doesn't mean that YC was designed to leave those over 25 out in the cold. It means that people who are able to dedicate themselves to their startup for 3 months, with constant access to advice from world-class entrepreneurs and investors, and the opportunity to pitch their ideas to every kingmaker VC in the tech world, will have an astronomically higher success rate than others.
You could say the same applies to any top-tier consultancy firm. Many professional occupations require people to be away from home/family for extended periods, people do it because it's necessary for the career they want to have.
25-30 year olds smart enough to build their own business wouldn't waste their time with YC. Most of the information and knowledge YC provides is openly published for free online. Aside from that the partners are always open to emails and communication. So why waste your money?
A lot of the value that YC provides is in the network, brand recognition, and mostly importantly, demo day. Depending on the circumstances, I would say just demo day itself is worth doing YC for.
Sorry. That was perhaps a poor choice of words. I mostly just meant that older folks might be more inclined to skip YC based on the existing YC knowledge that's freely available.
The knowledge is freely available, widely shared, and well covered/ commented on by many.
As someone who went through YC at 27, I think the structure, personal input, coaching, and the community (IMO most important) are incredible resources to increase the likelihood of success for your startup.
When you are creating a startup (defined as company hoping to experience hyper-growth/ hyper-impact), it is so hard that you need to accumulate as many resources and success factors as possible.
Knowledge is a huge portion of that - but YC packages significantly more advantages not only into ~3 months but also into the constantly evolving network it has cultivated.
Also, if you're a 25-30+ year old tech worker, and aren't financially incompetent, you probably have some savings and can use that as your seed funding instead of needing to join an accelerator.
That and the fact that you can bootstrap _most_ startups either by maintaining a full time job or consulting part time. The options for creating a tech business are endless but the Silicon Valley hive mind has done a good job of convincing a lot of people that you need to do it a very specific way.
Another niche worth targeting (that VCs wouldn't bother with) is a business that has potential revenue of $200k-$1M per year. That isn't the home run that VCs would want, but it is enough to support a team of 1-5 people.
I think you are getting blinded by to much of a "halo".
After all that's a bit like thinking that someone has to go to an Ivy League school (let's say Harvard) or "game over".
We all know that there are many successful people that didn't, and that additionally aren't even college graduates (and didn't drop out of an Ivy School either).
And by the way, YC is not the entire entrepreneurial world either.
"Peter won’t invest in any companies while they’re in YC or for 3 months after they present at Demo Day (this will apply to Peter’s investment entities as well), which should eliminate any unfair advantage."
I wonder if having Peter as an investor is a strong enough incentive that if they knew he liked them, a company would change their behavior for the 3 months after demo day.
While I found Thiel's recent work (Zero to One) to be extremely interesting, I am skeptical about a fair portion of it. I am much more inclined to agree with the claims in PG's startup essays, which seem to have been the cornerstone principles of YC.
Am I to that assume all of YC is adopting Thiel's beliefs as well? To be clear, I'm not saying both views are mutually exclusive.
If everyone agreed with Thiel's approach then it could only be described as obvious. The fact that people disagree with him is a good thing. The rational thing to do is test it. If YC adopts his approach then that will be a significant sample..
To be fair, PT has never said that dropping out of college was for everyone. If you take a closer look at the past and current Thiel Fellow, you will notice that they often come from the same top schools (i.e Stanford, Harvard, MIT, CMU, Waterloo).
The one that are given the opportunity to receive funding + support from the Thiel Foundation are incredibly smart and will (probably) succeed in whatever endeavour they end up choosing whether or not they get a full college education.
As a freshman in college, it is incredibly exciting to know that there is such structure existing.
Not bad. As long as you don't also bring Andreessen. I can't forgive him for what he did to Oculus. Could you bring Mark Cuban on board, too? That would be great.
I can't help but think how this reflects on YC's previous words in regard to diversity in the tech industry. The obvious snark involves the word "myth" or expanding YC's diversity to include people on record as opposing it, but my intent is not to express snark. No surprise when money trumps the need for explanation. I guess being a billionaire means never having to say you're sorry.
Peter Thiel is a political extremist, and I don't like a lot of his views at all. My point of view is that this is bad for YCombinator, and that this is a bit of a shame.
Without additional qualification, "political extremist" just means he holds unpopular views. (What else defines "extreme" in any absolute sense except for what's currently popular?)
Turning away potentially strong partners with well-understood and compatible investment philosophies and significant relevant achievements because they hold unpopular views in unrelated arenas is not good policy.
Maybe YCombinator needs diversity in political beliefs on top of gender then? Get some anarcho-capitalists, anarcho-communists, a few facists/juche, sprinkle in some socialists, a hint of traditionalists, and a few neo-reactionaries. Hehe, that'd be fun to watch.
“Most importantly, I no longer believe that freedom and democracy are compatible.”
"Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of “capitalist democracy” into an oxymoron."
This was the first thing I thought of, and to be honest I'd be interested in seeing how this circle is supposedly squared.
I'm working on something pretty awesome for which, for the first time, pitching it to YC seemed like it could be a good idea; to be honest, I wouldn't feel right doing that now with YC talking out both sides of its mouth.
I think making the claim that democracy and "freedom" aren't compatible is comedic at best. "Freedom" is an incredibly nebulous concept and it's no secret that we have AND should have laws that restrict behaviors like say murder, or rape. What he really means to say is "democracy is a threat to the things I want to do", and when it's coming from someone who's a member of the ultraelite, well, then... maybe it should threaten what you do. Democracy was created so THAT the masses could overpower the special interests of the elites.
Depends. Is somebody who decries the extension of franchise to women because they don't adhere to libertarian views somebody that you'd willingly associate with?
Personally, I wouldn't, because I like looking myself in the mirror, but your mileage may certainly vary.
I am in favor of not working with people who say that giving women the right of self-determination is a negative. Do you really intend to act horrified over such a low standard of decency?
(The anti-poor thing is disgusting, too, but I mean, at least there's an argument there.)
It will be even more interesting to see if their combined insights and approach can increase their chances of identifying these rare black swans.
Regardless, this has to be among the most formidable grouping of startup talent and brains in the valley.
[0] http://www.paulgraham.com/swan.html