
Jason Calacanis' Warning To Y Combinator Startups [video] - hajrice
http://www.youtube.com/watch?v=2cdrCYrZIvI&feature=channelhttp://www.youtube.com/watch?v=2cdrCYrZIvI&feature=channel
======
randomwalker
For those who prefer reading, or can't reach Youtube, etc.

"This is a message to YCombinator companies and hopefuls: if you tell Facebook
about your startup before you reach critical mass and you get found by
Facebook in any way you're an idiot. They will steal your company's ideas and
try to get you to take a small price for your company and vision and take a
job at Facebook. Which by the way is going to be a job that sucks. Don't do
it. It's a scam. It's a trap. It's a trap. It's a trap. Insert Star Wars quip
here. It's a trap. IT'S. A. TRAP. End of message."

~~~
strlen
This sounds completely bizarre. If your ideas are such that they can be stolen
and executed upon by others trivially, than a job at Facebook (with a signing
bonus) is pretty damn impressive exit.

~~~
tptacek
Say what? Posterous isn't rocket science, but I'm pretty sure they wouldn't
consider a signing bonus at Facebook impressive.

~~~
strlen
Posterous is out in the open for everybody to see. Why hasn't Facebook "killed
it", then? Understanding user behaviour and preferences is part of what makes
something defensible. Not having to build a product to operate at Facebook's
scale (and expectation of reliability) at day one is a way to help discover
people's preferences, especially for a "new idea".

~~~
10ren
Can you elaborate on "understanding behavior and preferences" with some
example behavior and preferences, please?

There are many bases of competitive advantage, but I don't have a clear
picture of this one. The main customer-side advantage I see is that your
product becomes identified with the idea/technology in the customer mind
(perhaps of a tiny niche) - not that it's _better_ than something else, just
that it _exists_. But there's still a problem of getting to this state.

~~~
strlen
Greenspun has an even better explanation of this than I do:

 _The most reliable source of supranormal profits is superior knowledge of one
kind of customer (Way #3). Ideally this will be the kind of customer that
larger companies are overlooking. The founders of SAP, for example, were
employees of IBM Germany for many years and got exposed to the accounting
challenges of large manufacturers. When they quit IBM, they were among the
best situated programmers in the world to build an accounting system for
manufacturing companies. It is not because these guys were the world's best
programmers that SAP is today bringing in $10 billion per year in revenue and
has a market capitalization of $60 billion. It is because these guys were the
best programmers who understood the problems of their customers._

<http://philip.greenspun.com/business/startup-tips/>

~~~
10ren
Thanks! Domain knowledge - but applying this to a mass market feel a bit mind-
bending to me.

Of course, it's still problems and knowledge, and so not qualitatively
different from those in a specific niche. I guess the misleading thing is that
by the time a mass market is mass, they are well-known (or appear to be). As
an example, Youtube was once small. And while the consumers were perhaps (?)
easy to understand, the producers (who created the value), were a much smaller
group, a more specific kind of person, using specific new tech (mobile phones)
with specific problems. And it only later grew into a mass market (though I
guess arguably the producers are still "one kind of customer".)

------
tptacek
_As viscerally unappealing as it is to find myself agreeing with Calacanis_ ,
I'll note that Facebook doesn't even need to intend to trap YC companies for
the net effect to be negative. The problem is the same as with "strategic
investors": an early, quasi-structural relationship with a potential acquirer
may be perceived as a de facto right of first refusal to the rest of the
industry. It can be a trap even if it wasn't designed to be!

I sort of watched this happen with a friend's company.

Obvious caveats apply: (a) I'm not a social networking entrepreneur and don't
know the space that well, (b) you have to balance the risk --- and the
opportunity cost of another business in a different market --- against the
benefit of collaborating with Facebook, (c) to whatever extent Facebook
benefits unreasonably from this program, YC probably suffers.

~~~
jmtame
jason is making it sound as if he personally knows someone who made this
mistake. i think you're claiming the same, and based on how many (few)
acquisitions facebook makes, it's possible that you both know the same person
who feels they were "trapped." can you say who it is, or did you intentionally
leave out the name of the person you know?

edit: sorry if i misread this part to imply it had to do with facebook: _I
sort of watched this happen with a friend's company._

~~~
tptacek
I don't know anyone who's been scammed by Facebook. I like Facebook.

------
pg
If a bunch of startups that might have grown big were nipped in the bud by
Facebook, it would be as bad for YC as for them. So Jason is essentially
claiming that by agreeing to let YC-funded startups get early access to
Instant Personalization (which is all this deal amounts to), we were acting
against our own interest.

That should at least make one skeptical about his claims. It is possible that
we've done something that wasn't in our interest, but surely by default one
should assume we understand and care about our interests more than Jason does.

Or to put it more briefly: this is mere linkbait.

~~~
jasonmcalacanis
Paul,

Respectfully, it is _not_ linkbait.

This is my honest opinion based on Facebook's track record. I would give the
same advice to any startup: don't trust Facebook and don't give them any
access to your startup or plans.

Period. End of story.

If an entrepreneur needs any evidence of the trustworthiness of Facebook,
simply talk to folks inside of Quora, FourSquare, Twitter and Zynga (among
others). I'm sure you've spoken to folks inside these companies, like I have,
who are infuriated with Zuckerberg's blatant stealing (without innovation).

At every chance they can get, Facebook has simply stolen. Given their scale,
bringing them inside the incubators is, well, mind boggling.

If you're a startup company you should be _avoiding_ Facebook and their
staffers.

I'm sure you have great intentions PG, and you know I respect all that you've
accomplished, but don't dismiss me. I really don't need press because, to a
certain extent, I _am_ press.

Add to that the fact that I'm massively overexposed (especially here on HN),
and you're claim that I'm link-baiting feels disingenuous.

Like you, I love startups and entrepreneurship. I only want to see folks do
well and not get ripped off by Facebook, which I consider the most unethical
company in technology.

One only need to look at the mountain of lawsuits they've generated for proof
of this. Facebook's long list of lawsuits are not from ambulance-chasing law
firms mind you, they are by _PARTNERS_ and _FRIENDS_ of Zuckerberg's! Oh yeah,
a lot of the lawsuits and complaints are also by privacy groups and government
agencies trying to protect citizens.

If Zuckerberg has no problem screwing his friends, partners and customers,
what do you think he will do to a three-person startup that might innovate its
way into being competition for him?

I fear you've made a big mistake letting the fox into the henhouse.

Startups: listen to PG on everything since he's brilliant--but take my advice
on this one. :-)

best jason

~~~
moe
_but take my advice on this one. :-)_

Why, on earth, should anyone listen to you?

Did you provide data? No. Did you provide facts? No. Do you have any kind of
credibility whatsoever? No.

All you have is a pink blouse and a pathological case of Narcissistic
Personality Disorder that you unfortunately feel obliged to broadcast in HD at
the slightest opportunity.

And by the way, do you know what will happen when facebook/YC screws people
over? The word will spread like wildfire. Because people have their own little
voices around here. We don't need you and your pink blouse to save us.

~~~
techiferous
Please, let's keep the discussion on HN civil, rational and lacking in ad
hominem attacks.

~~~
sprout
Frankly, pg should not be dismissing his detractors' arguments as 'mere
linkbait' if he wants to maintain a civil atmosphere on this forum. Not to say
your direct parent was justified in his flaming, but our curator should have
known better than to throw in that spark.

------
MichaelApproved
Didn't this exact thing happen with divvyshot? Facebook bought them, shutdown
the company and had them working on image functions within the site.

From what it seemed they didn't get paid much since they were mostly after
what the guys learned from the site. Meaning it sounded like they were just
after talent and not technology or user base. Can't imagine that would be a
multimillion dollar deal.

[http://techcrunch.com/2010/04/02/facebook-buys-up-
divvyshot-...](http://techcrunch.com/2010/04/02/facebook-buys-up-divvyshot-to-
make-facebook-photos-even-better/)

~~~
j_baker
So it was an HR acquisition? Point me towards a big tech company that _hasn't_
done an acquisition like this.

------
paul
It's sad that this troll gets more upvotes here than the original announcement
did.

Obviously every startup needs to be mindful of the potential for competition
from larger, more established companies, but avoiding all the opportunities
they create is even riskier.

If you want to be really sure that nobody ever "steals" your great idea,
target an obscure platform (Linux desktop?), stay in stealth mode, blackout
your windows, and keep all of your computers in a faraday cage. However, if
you want to to build something that matters, you're going to have to take some
risks and get a little closer to the fire.

------
RBr
I think that Jason says a lot of stuff to be sensational. He's building an
audience of subscribers for his ThisWeekIn network of video podcasts. He's
really good at thinking of sensational stuff to say in order to get people to
look at what he's doing. "SEO Is Dead" comes to mind.

Jason could honestly feel that a company or two has received a lower valuation
then they deserved, but isn't that the early stage VC game in a nutshell?
Investors trade time for value - they invest early in something they think
will succeed. In the end, early stage investing isn't a bad route for people
to take. Sometimes, it's the best (or the only) way for a product to get off
of the ground.

~~~
j_baker
I strongly disagree with what he's saying, but I don't think that's a fair way
of characterizing Calcanis. To me, it seems as though he trusts his gut
instinct. Nothing wrong with that until you trust gut instinct at the
_expense_ of sound logic.

~~~
RBr
I'm not saying this haphazardly or even negatively. I'm not one to ever jump
on the "bash Jason" train because I think that he is a smart guy working hard
to figure out how to be successful.

However, one of his core strengths is talking. He knows what to say and when
to say it and how in order to attract people. He is using this issue as a
platform to reach his existing audience while attracting new people.

I'm not saying that he's right OR wrong about the issue itself. What I'm
saying is that he uses topics like this as a platform to further his own
influence. The proof is in the pudding... this is a hot story on HN and
hundreds of new potential viewers have checked out the clip and likely the
entire show.

------
znmeb
Paul, Jason: I think Silicon Valley has a _huge_ problem, and this whole
Facebook / YCombinator thing is a symptom. Silicon Valley's problem is that it
values only dollars and code. Silicon Valley has become a world where the
hacker culture, lifestyle, behavior and attitudes are the norm - a world where
gladiatorial combat in code has replaced the discipline of software
engineering.

------
marcamillion
I understand what Jason is saying here...but to be honest, it's hard to tell
someone that is used to living on $40k/year, that they shouldn't take an offer
of $20M - that instantly makes them a millionaire.

Ofcourse, once you make that first sale and have the FU money to fall back on,
it makes gambling (i.e. growing to IPO) much easier.

I am a little skeptical of Zuck too though.

~~~
MichaelApproved
$20mil from a company that isn't public yet isn't as good as it sounds. Who
knows what the vesting terms are as well.

Yes, it's still a lot and there are ways to sell the stock but that's assuming
they even get $20 million.

~~~
marcamillion
You say it's not 'as good as it sounds', it all depends on your perspective.

If you are earning $40k - $60k/year - which many young founders were likely
earning before joining YC - even if after multiple dilutive rounds of
financing you end up with 10% of the company, in a $20M exit....that's still
$2M.

Sure, you can't buy Fiji....but you are literally going from a bank account
with a few hundred/thousand/tens of thousands, to literally hundreds of
thousands/millions.

That is VERY major the first time it happens.

I guess the point I am making is, the jump from having $10K in the bank to $1M
in the bank, is SOOOO much bigger than from $1M to $100M - because it impacts
your life much more.

------
sbarre
I would say like _any_ other commentary on the web, consider the source!

Jason makes some good (if generic) points about any industry where large
incumbents will try to absorb or nullify innovative competitors or startups.

Microsoft did it in the 90s and 2000s as well..

But we all know how much Jason hates Facebook, so he's using them as the
bogeyman in this example, because, well, he hates Facebook!

Mapquest learned this the hard way when they got stomped by Google Maps.. If
your product doesn't have built-in "hard to replicate" or proprietary features
(or data), then a better-funded competitor can just buy their way past you by
using more resources to replicate what you have.

~~~
ephermata
Maps are an interesting example because map data is actually hard to
replicate. Google went ahead and built their own database anyway, after
several years of licensing from NavTeq and then Tele Atlas.
[http://blog.daveburrows.com/2009/10/08/google-drops-
teleatla...](http://blog.daveburrows.com/2009/10/08/google-drops-teleatlas-
for-us-map-data/)

This allows Google to do whatever they like with the data, including offering
turn by turn directions on Android.

------
malbiniak
I loosely know of Jason Calacanis and don't know what credibilty he has to
base these statements on, but it he does raise any interesting point.

What precedent does Facebook have to support the 3rd party developer ecosystem
on apps.facebook? _/me points at<http://developers.facebook.com/docs/api*>.

I'd be really interested to see what other HNers have to say about what I
think is the main issue: given you don't think becoming a facebook fte is your
desired exit strategy, what would you do to protect your IP from Facebook?

------
robryan
It also depends on how a business uses the access to instant personalization.
I would use it as a way to generate fast growth but also focus on segregating
this growth from facebook reliance, as Zynga has done to an extent.

This way if the relationship remains good you can continue to reap the
benefits, if it goes sour you have your own userbase with some separation from
facebook.

It depends though, plenty of developers are happy to put all their eggs in the
Apple app store basket because the benefit now outweighs to potential downside
later. This would be the same here.

------
eronarn
My reply: <http://www.youtube.com/watch?v=goc4COUe1Z4>

(I for one would much rather be stolen by Facebook than Mahalo.)

------
maddalab
Social media start ups or otherwise, it is rarely about the idea, it is about
the execution. If you cannot execute better than facebook you should probably
consider selling to them, if you can no amount of idea stealing should prevent
you from growing your start up.

And as part of the execution you guard against being locked in to a specific
platform.

------
middayc
link to a more verbose opinion before and after the cut:
<http://www.youtube.com/watch?v=AWJAkjF9qnY#t=1h14m44s>

------
Menamena
Who cares who really said it, I saw the Techcrunch post on this and I had the
same concern before seeing this. I think i posted - I hope Facebook doesn't
ruin YC.

------
lionhearted
It's amazing what high production quality on audio and video does for
credibility.

~~~
moe
Not sure if we watched the same video, but what I just saw was a yuppie in a
pink shirt, struggling so hard to project an image of self-importance that
it's bordering on slapstick.

~~~
jacquesm
I think you missed the sarcasm tags on the GP.

------
10ren
product -> platform -> library -> standard library -> language -> OS -> FPGA
-> ASIC -> SoC

"Reaching critical mass" [so customers _identify_ you with the
technology/idea] is one way to avoid this.

------
michaelhalligan
I didn't watch the video, did he mention his Tesla?

------
elvirs
i think he did this to get some traffic for show.

------
quellhorst
This is mostly Jason Calacanis doing linkbaiting.

------
erikstarck
I listened to a podcast where Jason was a guest not that many months ago (2-3
perhaps). He wasn't aware of the concept MVP ("minimum viable product") which
kind of surprised me.

Sorry, don't remember the name of the podcast.

------
c1sc0
I'm sorry, but even on HN I feel it is appropriate to reply to this jackass
with only two characters: FU [Edit: the downvotes be damned]

~~~
raganwald
Try placing a higher value on your time and energy. If something isn't worth
an upmod, how is it worth a comment?

~~~
c1sc0
Maybe it's just hat I believe those two characters represent an appropriate
response to that king of linkbait? Two more characters come to mind: PC.

