

Silicon Valley Guru Blasts Y Combinator Hype - k2xl
http://preview.inc.com/john-mcdermott/silion-valley-guru-blasts-y-combinator-hype.html

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pg
"Having such high valuations at such an early stage can repel VCs from
investing in a start-up, he said."

Nobody goes there anymore. It's too crowded.

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FredBrach
I didn't get that but it must be interesting... What does it mean plz?

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lotharbot
It's a quote from a very famous baseball player/funny man Yogi Berra [0]. It's
sarcastic -- normally, a place being very popular would be considered a sign
of success. But Yogi describes it as a negative -- as if the place is a
failure because it's "too crowded".

Likewise, it's normally considered a positive thing for a company to get a
high valuation from investors. This suggests that investors think the business
is very valuable. But Vinod has described high valuations as a negative. PG is
using a famous quote to point out that it's not something one would normally
view as a negative.

[0] <http://en.wikipedia.org/wiki/Yogi_Berra>

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pg
Actually the interesting thing about that quote is that it's self refuting. It
couldn't be too crowded if nobody goes there. The quote in the article is
similarly self-refuting. If a startup has a high valuation, that means
investors were willing to pay it.

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paulsutter
VCs who really believe that they are adding value not money should prove it by
making investments on the sort of terms YC gets.

Reading his remarks was the first time I seriously started to think about
applying to YC for my next startup. It gave me the sense that YC has really
cracked the code for company building and raising investment.

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malandrew
Are quality angels being priced out of these rounds? Definitely. But I don't
think that quality VCs are getting priced out. The top VCs know that each year
about 15 startups are responsible for the majority of the returns, returns
that pale in comparison to the initial investment, even those from current YC
seed rounds. The VCs not getting priced out are those that can try to self-
guarantee some sort of return from their investment. The top half dozen VCs
provide a lot more than just cash to a startup. They often help with hiring,
since their rolodexes of talent are very valuable.

An acqui-hire may be a failure insofar as VCs making money off founders are
concerned because those founders can find a way to cut out investors (if they
want to burn bridges), but AFAIK large acqui-hires of entire teams (20+
people) aren't total losses for top VCs that can buy their way into a
promising YC startup since many of those employees don't have double/single
triggers and will move to the new company in an acqui-hire. With that in mind,
top VCs can stack promising companies with talent they have contact with and
still at least break even at the end of the day if not profit. While it is
certainly not their goal, top VCs can at least avoid losing money by just
shuffling talent around Silicon Valley. This makes investing in the strong
founders PG and co fund attractive because of the reduced downside.

Big acqui-hires are a hedge. You need a solid founding team that can manage
team growth and a solid talent rolodex to be able to make those hedges.

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veyron
Yesterday's discussion on the matter:
<http://news.ycombinator.com/item?id=4513696>

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001sky
_Y Combinator and similar accelerators for causing excessive valuations in the
companies they mentor_

Its the investors that "cause the valuation", though. While this may seem
pedantic, its not. The Author of the quote, is an investor. And this is a
deflection. At worst, he's saying Y combinator is now a brand, like Gucci or
Apple. And that this is causing handbag or laptop prices to rise because of
the brand is attached.

It dismisses, prematurely, the possibility that the brand has or adds value.

Ironically, most of the value in brands is search/selection efficiency. It
seems a bunch of them are paying a premium to _not do legwork, discovery, and
etc_. Odd, then that the critique is directed outwards.

