

Are you sure you want to start a company? (A Letter to Y Combinator Applicants) - dongle
http://www.jonbeilin.net/2011/03/yc-application/

======
mindcrime
Most of that sounds pretty good, but I have to disagree with this bit:

 _Ask yourself: would you sell your company? Would you sell it for $20
million? If you answered yes, at this stage, find a new idea. You don’t love
it enough._

That strikes me as an over-generalized view. Different people have different
circumstances that are going to affect that decision. Somebody who has already
had a successful exit and is already set financially, or someone who is very
young, might have a different threshold for when they would or wouldn't sell,
versus someone who's older and who has never had an exit.

In my own case, as a 37 year old who's never had the "big exit" I can say that
there are few - if any - ideas that I _wouldn't_ sell for $20 million
(assuming I owned a significant chunk of equity at exit and was going to be
walking away with multiple millions of dollars personally.)

Sorry, but the chance to assure myself of financial independence now and for
the foreseeable future, and to buy myself the ability to work on whatever I
want in the future, could conceivably trump my allegiance to pretty much any
idea I might be working on at the moment. I'm not saying it would necessarily
be a slam dunk decision, or a decision I'd make on the spur of the moment...
but it would be awfully tough to say no to an exit like that, knowing that I'm
not getting any younger, and that another chance might not come along.

That said, if I were running a company, and owned enough equity to maintain
control, and had to face that decision, I would say "no" if I believed the $20
million exit was far less than what we would eventually achieve, and/or if
staying the course were the right thing to help more of the founders / early
employees ultimately realize their own degree of financial freedom.

~~~
dongle
I'm broke and my company is not growing. I believe that a large contributing
factor to the failure of my company was that we went in to it with an exit in
mind instead of a love for our product.

Would we have sold our company for $20 mil? Hell yes. But we went in to Y
Combinator excited about an exit and we stunted the growth of our company by
shooting for dollars instead of stars.

~~~
il
This is a serious question, so please don't take it as snark or mockery:
Wouldn't shooting for dollars increase the growth of your company? Or at least
get it ramen profitable so it can't die/fail?

~~~
dongle
You're right – I used colorful, imprecise language. Yes, you should try to
make your company profitable. I'm speaking in the context of exits.

------
il
I don't think I want to change the world right now. I really don't. Does that
make me a bad person or unfit to be an entrepreneur?

All I want to do is solve a real problem for some segment of a large market
and make their lives a little easier. I want to build as much value as
possible for my customers, so that they are willing to pay good money for my
software. And yes, I want to get rich.

I agree that optimizing solely for a quick flip is not the best way to build a
successful business. I would rather optimize for growth and creating value for
customers and investors.

But questions like "Why is there so much materialism? Why is it so
competitive?" strike me as absurd. If you accept the premise that a startup is
a business and a fundamentally Capitalistic(rather than Marxist) endeavor, why
wouldn't there be materialism and competition? Isn't that the point?

~~~
dongle
Your comment: "All I want to do is solve a real problem for some segment of a
large market and make their lives a little easier."

My article: "That drive to make a part of the consumer world better is the
mark of the entrepreneur."

I'm not saying everyone needs to cure AIDS. I think our sentences seen side by
side align quite nicely.

~~~
michaelochurch
Here's what I would love to see, on the "make the world better" front.

First, let's be honest about our industry: programming is a lot of fun, but
our industry kinda sucks. Most software produced is sloppy and buggy with bad
APIs, most decisions are made based on economic factors, and most programmers
are seriously underskilled, which wastes the time of the skilled. (I love
strong static typing, though. The guy who is always breaking APIs actually has
to fix his shit.) Even in startups, most of the code is hastily written by
necessity. Moreover, technology is the best industry out there. Software
sucks, but everything else sucks more.

I realize I'm hijacking your line of thought, but here's a problem that could
be solved with enough thought put into it. Most smart people really want to
work and, when they're motivated, will work very hard and very creatively. But
less than 10% of people are doing what they want to do or are really motivated
to do it well, so we have a shitty world where most people don't give a fuck.
Most people, by age 35, are just jaded clock-punchers who just do what they're
told because it's the path of least resistance. We're different; we're
idealistic and trying to fight that trend, but "the enemy" (the ocean of
suckitude outside our borders) is winning.

So, let's solve _that_ problem. Let's not just fix the software industry.
Let's fix work. There are millions of creative people out there with amazing
ideas not getting implemented, while the very rich get to implement their
shitty ideas and impose them on the rest of the world. How do we make a world
that harnesses rather than suppresses this enormous amount of creative and
industrious energy that is not being utilized?

~~~
TheEzEzz
> How do we make a world that harnesses rather than suppresses this enormous
> amount of creative and industrious energy that is not being utilized?

I think this is exactly what we're seeing more of. Sites like reddit really
allow for people to tap into their inner creativity and make something that
makes other people happy (like rage comics).

Of course, no one is making money off rage comics (except reddit). I'd love to
see more start-up ideas that empower regular people to make a living doing
something they could be happy doing. In fact, I'd love to just hear some
_ideas_ along those lines, because my brain fails when brainstorming about
this.

~~~
michaelochurch
I did a blog post on this sort of thing:
[http://michaelochurch.wordpress.com/2010/10/25/those-who-
wor...](http://michaelochurch.wordpress.com/2010/10/25/those-who-work-for-
free-and-are-paid-to-do-nothing/)

Sadly, I think that there are too many people in power who want the current
arrangement to persist. Allowing people to work more creatively is great for
society, but it's bad for the people who currently hold power (who care more
about their relative position in society than the health of society as a
whole). I don't see a non-confrontational solution.

I'm half socialist. I actually think the best way out is to provide a
substantial basic income. Emphasis on _basic_ , not minimum, income. The
difference is that MI means the government makes up the difference for low
earners, whereas BI is an amount (of cash and services, such as healthcare and
education) that everyone-- rich, poor, or middle-class-- gets. Then there's no
"welfare valley" where a person becomes poorer by getting a job; one's income
is a monotonically increasing function, as it should be, of what one earns. I
think the BI should be about 50% of society's income, financed through flat
taxation, a small wealth tax at the upper end, and very high (90+ at top)
inheritance taxes. The other 50% is distributed by a free market. This
actually makes most middle-class peoples' net tax (remember that they get the
BI as well) _lower_. I would also, if you haven't guessed this, cut the
military budget dramatically.

Once BI is in place, you don't need the patchwork of semi-authoritarian and
conditional welfare programs that require bureaucracies to prevent abuse and
fraud or determine who should get it and who not: everyone gets it. The rest
of the wealth is allowed to flow on an essentially free market (so you have a
capitalistic engine on top of the socialist infrastructure). It's freer than
the one we have. For example, once everyone has basic income, you don't need a
minimum wage (which is just a clumsy minimum-income program paid-for by low-
end employers, who compensate by hiring less, creating unemployment).

No one has to work, so the least productive people probably use the option not
to work, but the most productive people do a lot more: they're more creative,
autonomous, and effective. Basic income wouldn't stop most people from
working, but it would dramatically change _how_ they work-- for the better.
The net gain is positive. The worst thing about basic income is that it
_might_ create an underclass of entitled parasites at the bottom of society,
but authoritarian corporate capitalism has a class of entitled parasites at
the top of it, and that's a lot more unhealthy for society.

One partial fix might be to "fix" job searching, but internet career sites are
nothing new and, while they might match talented people more efficiently with
jobs, don't fix the underlying problems of corporate capitalism. Startups are
great, for people privileged enough to do them and connected enough to have a
shot, but in the "real world", bad people are on top and hold the cards.

~~~
ericd
I'm not convinced that letting everyone do what they want/feel passionate
about is a good thing for the economy, and I'm quite sure that it's not the
way it is because of a conspiracy of the people in power. Many, many people
feel most passionate about things with nearly 0 economic value, and if they
all had jobs doing those things, the economies that followed this kind of
thinking would probably not be doing so well.

There are many things that need to be done to keep something as complicated as
a world economy of specialists running, and many of them are not fun or
intellectually stimulating. Maybe when robots have replaced us in all those
roles, and programmers can wield the labor of a thousand workers.

~~~
michaelochurch
I'm advocating basic income, not "everyone does what they feel passionate
about". After this one very important socialist reform, we'd still have an
essentially free market. In fact, we'd have a _freer_ market because people
would be free, not forced by poverty to work. A lot of people don't have much
vision or passion and would prefer doing things for money over not doing
anything and settling for a lower-middle-class lifestyle. So the toilets would
still be scrubbed, because people would pay others to do it.

On the other hand, the people who follow their passions would be merely living
on not-very-much, but not at risk of starvation, long-term underemployment,
medical bankruptcy, et cetera.

------
ultrasaurus
>Would you sell it for $20 million? If you answered yes, at this stage, find a
new idea.

Selling a business for $20M would make it a lot easier to get traction for
your next idea.

~~~
ChrisCooper
I think he's not suggesting it's bad to sell your company, but rather that
going into a new one with the idea that you're only there to make money is a
bad idea.

~~~
zackattack
or he's a shill for the "very rich" (lol) VCs at ycombinator trying to
optimize for homeruns rather than community feel-good 20mm exits

~~~
dongle
Hey I think we've met IRL in an apartment on McKinley Ave. You know where I
live and that it is not glamorous. I kind of hoped the text on the sidebar
wherein I'm begging for money would contextualize the post appropriately.

------
mttwrnr
I can relate to a lot of what Jon is saying in the article, but quite honestly
the impression I've gotten is that investors are only interested in the "quick
flip" and don't want to hear the grandiose plans.

It seems like if I were to talk to a potential investor and tell them the
ideas I have to change consumer behavior for the better and connect an
industry in a way that hasn't been done before, they'd tell me to stop
dreaming and to forecast their 10x.

If every company sells to Google when they get a chance, who becomes the next
Google?

------
brijeshp
I agree with most of the other comments here regarding the over-generalization
of the $20 million offer.

"Would you sell it for $20 million?" There are so many variables for
consideration in answering this question that can result in anything from a
symbiotic relationship with a bigger player to augmenting the market using the
buyer party's core competencies to just forfeiting the rights to the other
party (which is the only viewpoint factored into the author's answer- "find a
new idea"). Don't need to necessarily find a new idea as much as be a master
of the idea's fate.

Nonetheless, I heartily agree with the last section- mastery of a domain of
knowledge. Advice needs to be slapped as a layer on top of hardcore expertise.
I've made this mistake in the past of letting the allure of a tech lead me to
an area where I didn't have the necessary expertise and idea dissipated
quickly. Now I'm focused on an area that my partner and I have deep-seated
expertise in and the advice is very easy to cut through to take only the
nuggets that apply.

~~~
dongle
Again, you're totally allowed to sell your company for $20 million dollars (or
less) when the offer comes. If you're thinking about exits at all at the SEED
FUNDING STAGE of your company, that offer is never going to come.

~~~
michaelochurch
_If you're thinking about exits at all at the SEED FUNDING STAGE of your
company, that offer is never going to come._

If the maximum potential is $20 million, and we're talking about the VC-style
go-big-or-go-home sort of business, I agree. A business that will be worth $20
million if everything goes right is likely to end up near zero. The
distribution is non-normal and most companies don't reach 50 or even 25
percent of their maximum potential, but less than 1 percent. If the IPO option
isn't at least open, try again.

On the other hand, I think people should be honest about all the
possibilities. Choosing a path based on what happens for the winningest of the
winners is a terrible idea (even though it's what a lot of people do, and why
companies overpay their CEOs; overpaying executives is actually cheap when you
consider how much harder the chumps work for the slim chance of reaching that
level). Which is better, a 60% shot at a $20 million exit, or a 1% shot at $10
billion? Expected value (which VCs care about) says one thing and common sense
says another.

------
mtran
Your article made my heart race; all the way through I was thinking "That's
US"! Especially the "touch of insanity" part because we are selling our house
and taking some pretty big leaps to make this thing happen.

We only learned about YCombinator about 2 weeks ago, within days of having
decided to go "all in" but it's too great of an opportunity to pass up so
we're scrambling to hit the app. deadline while getting the house on the
market, planning next steps etc. But we are so energized everyday by the
possibility of bringing our idea to life.

The Ron Conway quote was right on time for me -“real entrepreneurs aren’t
thinking about exits; they’re thinking about changing the world”... I always
feel a little nuts for being sad when people say things like "you'll probably
sell to...for millions"... but from now on, I'll think about you, Ron Conway
and changing the world and smile because clearly, I'm not the only one! Thanks
a bunch for this post.

------
seanahrens
Jonathan, thanks for the great post. I agree with you (unlike a handful of HN
commenters) on feeling uneasy about the materialism, doing a startup for the
money, etc. I saw (and experienced) a lot of that first hand and never really
understood it. Doing a startup to get rich off a startup in my opinion is like
playing in a rock band for the fame and money, not for the music.

------
flipside
I would totally be open to the possibility of selling my company someday, it's
just that they would have to be just as crazy as me to take me up on my terms.
Not everything revolves around $$$.

------
rythie
A better question than the $20m question would be: Would you sell knowing the
aquirer would shut down the product, like many that sold to Facebook have for
example.

------
michaelochurch
Ok, it's time to pour some cold water here: there's no such thing as the "true
spirit of the entrepreneur". This phrase is reminiscent of the "you cannot
grasp the true form of [X]" meme. Cool it, Giygas.

An entrepreneur needs confidence, freedom, and opportunity. There needs to be
a problem for him or her to solve, he or she must believe that it can be
solved, and he or she needs the resources and freedom to do it. Then, he or
she needs to be _right_ on the solubility of the problem given available
resources, and able to capture the value created (if he or she cares about
being wealthy). That's all. It's not wizardry. It is something that few people
have the freedom to do.

I think 20-year-olds' garage startups are very cool but overrated. People
write about it because it's rare. The best time to start a business, for most
people, I would put around age 35-50, when one is still young but has the
experience to judge whether it will work, enough years to one's name that one
can hire experienced people (no one wants a younger boss) and the connections
to pull it off. (I'm 27, by the way; not an older person trying to justify
himself.) Y Combinator gives the people in their 20s a bump by providing
connections they'd otherwise never have, and that's an awesome service, but
that's atypical for people of that age, and the prestige and contacts of YC,
if not singular, are something most of its brethren don't have.

Also, I think it's very naive to believe anyone wouldn't "sell out" for $20
million personally. At $20 million, that lie school tells smart people about
the world being their oyster becomes true. Ideas come and go, but being rich
means you actually own your life instead of renting it from a series of
employers (or, if you're lucky enough to be in a startup, VCs). The second-
best thing about being rich is having the freedom not to work, but that (from
what I've heard) is like a toy that gets boring after a few years. The
_actual_ best thing about being rich is having the freedom _to_ work. (The
shuffling around and taking orders from others, in an artificially stressful
office environment, that most people do? Not really work. Real work improves
the world and _matters_.) I can think of very few legal and ethical things
(and some ethically acceptable but illegal ones) I would not do for $20
million; I'd have the confidence of knowing that I can do real work for the
rest of my life. Seriously, I'd _love_ to kill all of life's stupid anxieties
and dedicate (most of) my existence to useful work.

~~~
dongle
Dude, it was in all caps for comedic effect. It's the most melodramatic WOO
MONEY AND STARTUPS phrase in my article. Was that an Earthbound reference?
I'll give you some points for that, at least.

The rest of your comment is rehashing things that have already been discussed
above.

------
Apocryphon
I wonder how the case of Kevin Rose and Digg gels with all of this.

------
noverloop
yes.

The way I see it, the only way to have sustained positive impact on the world
is to allow humans to be more human and entangle it in the worlds economic
system so it remains in place. That construction can only be achieved by a
business.

