
Y Combinator’s Young Startups Tout Revenue Over Users  - JumpCrisscross
http://go.bloomberg.com/tech-deals/2012-08-22-y-combinators-young-startups-tout-revenue-over-users/
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ebbv
The thing that bothers me most about the "startup culture" that I see is not
just touting revenue but constantly touting _funding rounds_.

It's great that you're funded, but that has nothing to do with me, nor is it
evidence that you are ever going to accomplish anything worthwhile, IMHO. It
just means you convinced someone with money that you're going to put their
money to good use. Their confidence means nothing to me.

~~~
pg
It's odd how this comment appears so frequently on HN and yet each time
someone makes it they seem to be under the impression they're making a novel
observation. It's like the comment that copying music isn't stealing, or the
comment that when women say no they mean no.

There may be a pattern here. Perhaps the pattern is that these statements are
emptily true: they're either truisms if taken literally, or miss the point
otherwise. It may be the latter disconnect with reality gives the commenter
the impression that they have discovered some new insight that needs to be
mentioned. I.e. a truism that was also true when applied to the world would
clearly be something that everyone else also believed, and thus wouldn't be
worth mentioning.

~~~
tptacek
I think you may unintentionally be implying that there aren't lots of people
in the "startup culture" that do in fact consider getting funding to be an
intrinsically important achievement. That seems like a meme worth quashing.

I agree that the comment has become very boring. It is especially annoying to
see it injected into conversations that don't really involve VC funding.

~~~
pg
It's an achievement of a sort. It's kind of like winning a medal: the metal
disc in itself is unimportant, but it matters because it's a sign someone was
impressed with you for something.

As with medals, how much it matters depends on who was impressed with you and
for what. Later rounds converge on measuring revenue, which is what people who
think companies shouldn't be celebrating fundraising usually think they should
be celebrating instead.

~~~
dkrich
I disagree with that analogy. A medal is, in and of itself, the award you are
seeking to win. Yes, there may be an intermediary goal involved, swimming 200
meters faster than anybody else, or having an invention that is viewed as the
most innovative in a field. But the medal represents your accomplishment.

A funding round, as I understand it, is financing to enable a certain goal. I
don't knock companies that seek funding, and I would congratulate any that
received it IF that is something that they deemed necessary. I think this
notion that it is an "achievement of sort" is the type of thinking that
elicits these types of repetitive comments that remind people, an investment
round is awarded to make possible a goal by increasing its access to
resources.

~~~
mikeryan
_A medal is, in and of itself, the award you are seeking to win_

I think you're missing the distinction between the symbol and the act. A medal
is _not_ what you are seeking to win. Its a representation of what you have
achieved (which seems to be pg's point). You can take away all of Michael
Phelps medals and it won't in one way diminish the fact that 18 times he was
the fastest guy in the pool at the Olympics.

~~~
dkrich
And if I take away your 4 rounds of funding have I changed the viability of
your product in the market place?

Conversely if I fund you, does that in any way validate your product? Nope.
Paying customers do that I'm afraid.

To suggest that a round of funding is an achievement in and of itself is to
put it in the same camp as winning a business plan competition. Sure it might
show that One person likes your idea, but that's pretty much worthless
compared to paying customers.

~~~
dkrich
Heh, you guys are hilarious. Bring up disagreements about the BS funding train
in this echo-chamber and get downvoted to hell as if that makes the statements
any less valid. Hahahahaha, downvote away.

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polyfractal
_> Entrepreneurs in Y Combinator may be taking a cue from the program’s co-
founder, Paul Graham, who in June penned an open letter urging young startups
to focus on making money as a hedge against a potential downturn in Silicon
Valley [...]_

What a crazy idea! Companies should try to make money!

~~~
pg
I'm not sure if you're misunderstanding this intentionally or unintentionally,
but the issue here is not whether companies should make money, but when. There
are plenty of valid strategies that defer profitability. Paypal for example
spent tens of millions of dollars before they reached breakeven, and if they
hadn't, all other things being equal, they would have lost to a competitor who
did.

~~~
aantix
>There are plenty of valid strategies that defer profitability.

You can't point to the exception, the case that just happen to work out, and
consider it a valid approach.

The time to make money is always now. Any other approach is just deferring the
inevitable confrontation of whether the company/idea/execution is economically
viable.

~~~
pg
That's not the exception. Few to zero of the biggest technology companies were
profitable the first month.

------
RealGeek
YC S12 batch is one of the strongest YC batches of all time. This time the
startups not only have a good product; but developed business models,
customers and revenue.

Moreover, a lot of startups launched far before demo day. I guess majority of
the startups had a product ready when they got into YC.

~~~
webwright
It's interesting to note that 20% of the companies have been working on their
business for over a year (source: <https://www.statwing.com/demos/yc-s12> ).
Between that and the fact that YC is on record as looking for more clear-
revenue companies, I think this shift will be more pronounced.

Another interesting note is that every _major_ win (or apparent major win) for
YC so far has had a very clear-- and very early-- revenue model (Dropbox,
AirBnB, Heroku, OMGPop).

~~~
jedi_stannis
Do you not consider reddit a win for YC?

~~~
benologist
They sold six years ago when they were relatively tiny compared to today.
There's no way they would have been a "major" win up there with the 4 _huge_
exits webwright mentioned:

"We couldn't get them to tell us the acquisition price, but they did tell us
that the company has raised just $100k (all in summer 2005) and currently has
an average of 70,000 daily unique visitors and 700,000 or so page views."

[http://techcrunch.com/2006/10/31/breaking-news-conde-
nastwir...](http://techcrunch.com/2006/10/31/breaking-news-conde-nastwired-
acquires-reddit/)

~~~
tvladeck
While AirBNB & Dropbox are successful enough now to consider them "exits" -
they haven't actually sold or ipo'd.

~~~
webwright
For what it's worth, stock in companies at these stages are often pretty damn
liquid-- not quite as much as an IPO'd company, but still plenty liquid. YC
could sell their stock in either company at or near their recent valuations on
SecondMarket. For all we know, they could've partially cashed out in any of
the rounds (though I'd bet they haven't).

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trevelyan
Amazing job by Vayable! And congrats to everyone running a revenue-generating
startup at YC if this is enough of a trend that Bloomberg is reporting on it!

I really hope that this signals the advent of a genuine change in how
mainstream investors value revenue-generating startups, so that early-stage
companies can get away from being valued simply in terms of a revenue
multiplier and thus penalized in comparison to companies that ignore
fundamentals. Among other things, this is going to make it much easier for
bootstrappers, who need to build revenue into their products from the start.

And Paul -- if this is a real trend I hope you will follow up on this topic
with an article in a couple of months. While I know this stuff is sensitive on
a company-by-company level, it'll be interesting to hear how and if you
perceive valuations are changing for YC companies that put their revenue
front-and-center like this. My experience with a few friends in different
funded startups outside California is that beyond seed rounds investors are
still focused very heavily on users, users, users because the return period on
organic linear growth is perceived as too long or uncertain to justify
investing any sizable (greater than a few hundred thousand) infusion of cash.

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state
I read this as a pretty clear indicator of what the funding environment is
starting to look like.

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hobbyhacker
As well they should, just having lots of users and no plan for monetization is
a bad recipe most of them time.

~~~
Peroni
Whether or not it's a bad recipe isn't for me to say however I do struggle to
understand the motivation VC's have when they invest millions into companies
like lanyrd.com who publicly state (even many months after receiving funding)
that they have no idea how they plan to monetise the company.

Huge userbase, no monetisation plan. I appreciate all investment is a risk but
surely investing in a company who has no clue how to monetise is immensely
risky?

~~~
_delirium
It's risky yes, but VCs do some of their own analysis of likely monetization
strategies, along with potential acquisition value of companies. In some areas
that revolves around userbase and data: is there someone who would buy the
company for its users and the data it's accumulated about them? If so, it may
be worth investing in, regardless of revenue.

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anewguy
Okay everybody - time to change your pitch decks.

