
Can Y Combinator Be Beaten At Its Own Game? - imgabe
http://www.pchristensen.com/blog/articles/can-ycombinator-be-beaten-at-its-own-game/
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pg
_I summarize Y Combinator’s selection criteria as: “Young, Smart, Cheap,
Determined, Acquirable”._

Smart, cheap, and determined, yes. Young doesn't matter except insofar as it
helps cheap (and sometimes determined).

The point about being "acquirable" suggests a misunderstanding of how startups
work. Startups almost invariably take one of 3 routes: (a) failure, (b)
acquisition, or (c) IPO. Every one that takes (c) gets acquisition offers
along the way, but turns them down. So "acquirable" simply reduces to
"succesful." Which of course investors want.

And once you have that in the list, the entire list simplifies to
"successful."

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skmurphy
With respect, many startups simply persist, some profitably, some at
breakeven. Many founders would rather be in control than wealthy (or working
for someone else). Doubtless you screen out folks who favor control over
wealth so you don't see them. It's taken me a long time to understand that
while every founder "wants to grow" many don't want to grow beyond where they
can still be in charge.

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ashu
startup vs. small business.

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skmurphy
Many startups become small businesses. Some are called "the living dead"
operating at break-even. There are a variety of reasons. One can be that the
founders are comfortable with the current size. See
<http://www.investorhome.com/vc.htm> for an example breakdown of outcomes from
VC investment:

"VC firms typically manage multiple funds formed over intervals of several
years. Funds are illiquid but as companies in the portfolio go public or are
sold, the investors realize their returns. Funds typically consist of limited
partnerships invested in a number of companies. A general rule for the
breakdown of returns among VC company investments is 40% will be complete
losses, 30% will be "living dead," with the remaining 30% generating
substantial returns on the original investment. The big winners yield 10 or
more times the original investment."

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iamelgringo
This article supposes a competition. Why is it a competition if the essence of
creating a startup is creating wealth? If more companies get off the ground,
then more total wealth will be created. The more startups that are created,
then the more total wealth will be created. Startups are the antithesis of a
zero sum game.

And, if YCombinator is starting startups, then it is a wealth creation
machine. How will that be "beat" or competed against?

Also, I don't get the impression from PG that YC is out to dominate the
startup market. I do get the impression that they started YC because it was an
irresistible hack. That is, they set out to hack the economics of startup
creation. And, if another entity comes out and has a greater success ratio, or
greater volume of startups created, then I daresay that it is an ultimate
success of PG and crew. Why?

Because the hack worked.

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pchristensen
Dang it, I fell in to the trap (again) of not distinguishing my opinions from
a summary of the opinions I've read on the web. You'd have a hard time finding
a bigger fan of the "wealth creation" view than me, but most people don't
think that way.

I'm sure many (most?) investors and observers think there are a fixed number
of potential successful startup founders and that if YC gets all the good
ones, then there will be none left. pg takes the opposite approach, trying to
grow the pool of founders through his writing and community efforts. His anti-
job, anti-BigCo essays are eye openers to a lot of people (myself included)
who had never thought there was another way.

pg is definitely not out to dominate the market - I pointed out that he
purposely ignores a large part of the market to focus on the niche he's
interested in.

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skmurphy
This is a great post, but mis-titled. "Does success of Y combinator point to
existence of many alternate investing and incubation models" (in addition to
traditional VC, Angel, and office space based incubators).

There are several very thought provoking ideas in his list of alternatives, in
particular: A FPGA centric fund (certainly Xilinx, Altera, Actel might
sponsor), revenue generating startups with a dividend focus (or venture
buyout/buyback, especially if YC2 puts last investment dollar in and doesn't
have to worry about dilution), mixed business and technical teams, more
experienced professionals.

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pchristensen
Right, but titles never have been completely about accuracy, have they? I save
my precise, rational arguments for after my title has them fired up enough to
click on the link :)

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chris_l
"YC sounded pretty ridiculous in 2005 when pg announced it"

That's very honest of him! I guess that just shows that you can't accurately
judge a new idea a priori.

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pchristensen
I thought it was odd (plus I was a little jealous that I couldn't apply -
married, grad school, lots of debt, etc). But the blogosphere and all the
talking heads went crazy about pg forcing the children to drop out of school
and move to Boston, giving them peanuts to take an unfair share of their
equity, etc. People didn't get it so they attacked it. Looks like some things
never change (Arc, caged lions, etc)

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xlnt
pg forced them to do this by putting an application form on the web with so
many rounded corners they couldn't resist filling it out, or what? :)

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okeumeni
For a startup, the real value of YC is in the ‘network effect’ (as a business
grad friend of mine calls it) and the ‘know how’ (the whole advisory package)
of building a business around an idea; that is hard to beat even with time,
particularly with time.

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davidw
Nitpick: "know economics" sounds bad. It sounds like "I know programming" or
"I know physics" or something like that. Adding a "something about" in there
would make it work better.

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pchristensen
How's "...or even just know some basic economics..."? That's what I changed it
to.

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nazgulnarsil
the mercantilist approach to economics is not useful unless you're trying to
decode the reasoning behind international politics.

