
Y Combinator, Silicon Valley’s Start-Up Machine - g_h
http://www.nytimes.com/2013/05/05/magazine/y-combinator-silicon-valleys-start-up-machine.html?pagewanted=all
======
timjahn
"In the weeks and months following Demo Day, those few who fail to attract
enough interest must decide whether to begin a new company, find employment at
Google or Facebook or persist and grow “organically” — an unsightly word in
the valley of silicon."

Really? That's it? Get funding or go home?

Man. Those crazy entrepreneurs who persist and grow "organically." So
unsightly.

------
argumentum
Good article. As a yc alum who's idea(s) didn't succeed (yet), it's pretty
much on point on a lot of things.

There is one thing factually wrong, or at least incomplete .. you don't get
$100k (formerly $170k) for 7%. You get $11-20k for 2-10% plus $80k (formerly
$150k) at an uncapped valuation. Usually that % will be low.

The fundamental epiphany of YC/pg is that that we are no where _near_ the
limit on the # of startups .. and that encouraging hackers to become
entrepreneurs is a win-win for hackers, investors, users and the world in
general. YC will (continue to) be incredibly successful as long as it remains
faithful to this.

Also, never knew about pg's fear of flying .. very cool and inspiring thing to
learn.

------
argonaut
The tone and diction of the article really struck me as odd and unusual.

1\. The heavy-handed metaphorical comparison of YC to a summer camp: "During
that time, campers, or founders, have regular meetings with each of Y.C.’s
counselors, or partners," "The director of this camp," " basketball-court-size
dining hall,"

2\. "The Y.C. term culminates with Demo Day, or D Day." N̶o̶ ̶o̶n̶e̶
̶a̶c̶t̶u̶a̶l̶l̶y̶ ̶c̶a̶l̶l̶s̶ ̶i̶t̶ ̶D̶ ̶D̶a̶y̶.̶

3\. "or persist and grow 'organically' — an unsightly word in the valley of
silicon." - The correct word would be "bootstrap." - and it's a totally
acceptable word in the tech circles I've been in.

EDIT: Ah, I stand corrected. I worked at a YC company in the past and I had
never heard anyone (the YC founders I met) call Demo Day as D-Day. The snark
is really uncalled for.

~~~
tptacek
You mean nobody calls it dday besides Paul Graham, _all the time_.

There's a convenient little box you can ask for confirmation of that right at
the bottom of this very page.

~~~
rdl
I've never heard pg actually call it "dday"; I didn't even realize he'd used
it in writing on demo day a lot. I honestly would have assumed a reference to
WW2 or some kind of military attack if someone said "are you ready for D-Day?"
even in a startup context, or _maybe_ a reference to a specific company's
launch day, not demo day (by which time most companies have launched)

~~~
tptacek
All I'm saying is, you see the New York Times call YC Demo Day "D. Day" and
then someone says they got it wrong because "nobody" calls it "D. Day" and
your first response might be to go check that fact out, since that would be an
extraordinarily weird mistake for them to make.

------
bifrost
This article kind of reminds me of the stories bands and actors used to tell
about hollywood. Moving somewhere, living cheap then hitting it big - albeit
on a shorter timeframe.

"How can a company that earns no money be worth a billion dollars?" - Hotmail.
Those who forget history are doomed to repeat it :)

~~~
lanstein
You mean HoTMaiL?

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georgecmu
_It’s because of this power law: If a company has a 1 percent chance of being
a hundred-billion-dollar company, then it’s worth about a billion dollars_

Really, is this a power law? Looks to me like a simplistic application of
expected value.

~~~
habosa
Also nobody really has even a 1% chance at becoming a 100B company. There have
been very few of those in human history, the odds are << 1% even for a top YC
company.

~~~
earbitscom
You're forgetting that they are talking about the companies getting $1B
valuations, not all startups. If you line up 100 companies that are
Instagrams, Pinterests, Facebooks (when it was valued at $1B), etc, one of
them getting to $100B can absolutely be a 1% chance.

------
dr_
Having made several angel investments, I can tell you my eyes kind of roll
when I hear the billion dollar valuation. It's very apparent when a startup
has taken the number 1 billion and then just divided it by the potential
number of users for its particular product and then by 12 months to come up
with the monthly cost of the service. The last investment we made presented
numbers that were far more modest, but we knew the team seemed highly capable
and respected their honest assessment, so we went with it.

~~~
sgrove
Do you mean TAM instead of valuation? That's a very strange way (if that's the
only way) of defining a startup's valuation. Also, surely you wouldn't be
angel investing in anything with a valuation anywhere near $1B, you'd never
make any money.

~~~
dr_
Correct, i meant tam, not valuation.

------
tokenadult
Previous submission with some comments:

<https://news.ycombinator.com/item?id=5643426>

------
mmayberry
Why did Teespring take $1.3M in funding if they were on pace to make $1M the
following month? Why dilute your pool when your figure was just a month away
(plus whatever else was saved)

anyone have any insight?

~~~
wiwillia
Hi there - Walker from Teespring here. Both rdl and earbitscom are right. We
took money to give ourselves the cushion we need to scale and aim big, and we
raised it from people we believe can make a difference to our business.

I'm writing a follow up to my first blog post (wiwillia.com) where I'll get a
little more into the details of why we chose to raise.

~~~
mmayberry
cool. I liked part I. Looking forward to the follow up.

------
aashaykumar92
Why are some investors losing interest in YC companies? It's not only noted in
this article, but was also a topic of discussion after this past demo day. Is
it because YC seems to be investing in less startups 'trying to hit the home
run' like Airbnb, Dropbox, arguably Stripe now? To me, it's somewhat confusing
because the companies are still solving pretty darn realistic problems and are
doing so uniquely.

[edit] this comment was posted (somewhat so) in the hopes that one of the
partners will respond with their thoughts and if they plan to address this and
if so, how so?

~~~
pg
Because whenever a reporter asks investors at Demo Day for a comment, and they
ask themselves "what could I say that would be in my interest to have
reprinted?" the obvious choice is "prices are coming down."

And it's not true, incidentally. We don't have all the data yet but it's clear
valuations remained high last batch.

~~~
omegant
If they make it a meme, eventually valuations will go down, as VCs will be
influenced by the general "mood"(at least a portion of them will).

~~~
raldi
Hey, did you hear the suit is back?

------
markmccubbin
This is really great. I worked along side these guys (strikingly) in the same
cafe in SF, hacking away for a while before they got into YC. These guys are
humble and really doing it right.

They took what others just see as a clone of weebly and have added enough USP
to prove that it's all execution. They had customers even while sitting in the
little Cafe in SF and have growing fast through sheer force of will ! Biggest
thing, humble, not afraid to ask for help and thick as thieves.

These guys are what every entrepreneur should be trying to attain in a team !

~~~
cmstoken
Do you know when Strikingly launched?

------
bitsweet
Spot on account of what pre demo day is like. Its been well over a year since
demo day (W12), but reading that account was like reliving it all over as if
it happened yesterday.

------
rodrigoavie
Amazing article! What I find particularly interesting in this is not that it
highlights how awesome YC is and all that talk (I'm not saying that YC isn't
awesome, I'm much inclined to believe that it is) but how startups offer a way
for individuals to work with that they like more and how more and more people
are embracing entrepreneurship and how technology plays such an important
field in this.

------
staunch
...and now I have to sign up for hang gliding lessons. I also developed a fear
of flying suddenly (after having flown something like 250k miles).

------
bly2425
Now that's one inspiring story. $1600 a month in the Bay Area for 3 people?
Holy shit. You gotta wonder how these guys did it...

~~~
panther2k
It's doable but, as you would expect, it requires an extremely spartan
lifestyle. I'm running about $500/month in SF and am no stranger couch
surfing, lots of roommates, sleeping in my car, and (intelligently) fasting,
etc. I could theoretically go even lower by purchasing lower quality food but
I'm not willing to compromise my health.

Once you've seen the worst-scenario first-hand you realize it's not _that_
bad, and you can shoot for the moon without any fear.

~~~
eru
> and (intelligently) fasting,

Go to the hinterland once a month for cheap gorging on good food; fast the
rest of the month in SF?

------
EGreg
Probably the best article about YC I have read.

Not sure if that's saying much given how many I read, but perhaps it is :)

~~~
koops
I agree, it was beautifully written. I'll be looking for Mr. Rich's novel on
the strength of it.

~~~
kmfrk
He's actually Frank Rich's son, so if you like his father, you'll probably
take a liking to Nate's prose, too.

------
dcc1
[http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues...](http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues_mtgox/)

------
moonfern
On firefox aurora it runs between 40 and 60 fps (intel hd 2000 ). The
dedicated memory (65 mb) of that card is all the time the limit.

------
cjbarber
When they keep referring to $100,000 investments for 7%, this is a typo right?
(YC usually does ~$10k)

~~~
rdl
They mean $80k for YC VC ($20k each from Yuri Milner, Andreessen Horowitz,
General Catalyst, and Maverick Capital) plus the $14-20k from YC itself.

The ~$20k is for 7% (of common stock); the $80k is under START Note terms,
essentially convertible debt which inherits the cap/discount of the next note
you do. It's conceivable that just means an uncapped note, so adds onto your
Series A.

~~~
jordn
Do all the startups get the ~$80k VC money? And is that at the beginning of
the batch or at the end?

(This part isn't mentioned like the $14-20k funding is
<http://ycombinator.com/apply.html>)

~~~
rdl
Everyone is offered it; as far as I know everyone has always taken it. I got
mine around early July of the summer batch; I assume it's roughly the same
still. If you really needed it early I'm sure you could arrange that.

------
plaxis
Imagine if we could crowd fund this event!.. sigh.

~~~
stck
Do you mean there's a need for <https://wefunder.com/> ?

------
blantonl
pg, did this article accurately portray the YC process?

------
brryant
q: I wonder why Nikes are shunned in favor of Asics?

------
jokoon
french, unemployed guy here.

I envy you guys

------
monsterix
Guess this one looks like a post enthusiasm state but here is what I think is
going on lately (Disclaimer: I am an entrepreneur, I feel this, so please take
it all with a pinch of salt):

It seems that the race to get into a coveted program like YC has become
crowded. Almost every other startup that I met during last one year (50 odd in
two cycles) had applied to the YC program [premise-A], some gotten the
interview [premise-B] and some gotten into the program [premise-C].

 _Role of premise - A_ : Crowded race makes way for best YC 'applications',
and I have seen PG/YC liking the way the quality of applications have gone up.
Sure. However, the quality of application does not necessarily reflect the
quality of technology startup.

There are several areas where these two indices are not aligned perfectly:

For example, there are people who can write and tell really high quality
stories, given the amount of time at hand, but they're the ones who should
probably be doing literature and not technology startup (rant?). Then there
are other have-nots: The statistical bias of past YC batches seem to be away
from the relatively older entrepreneurs or heterogeneous teams. This leaves
out a bunch of gems.

Long story short: A crowded race forces not-so-great start-ups to focus on
getting into the program successfully and the great-ones to keep out/avoid/shy
away and focus on building their business instead. And sometimes lose on what
could have otherwise been a great partnership.

Then the process is in two batches. Great companies were not built in batches
so there seems to be a process conflict. Someone who is feeling great about
their startup in June-July would be depressed by December when winter
applications reopen. Perhaps a rolling-in applications model [1]?

 _Role of premise - B_ : I know a couple of really awesome guys who went for
their interviews and came back with a no. While there would have been genuine
reasons, or simply bad luck, for these people getting rejected but I saw at
least a few of them outgrowing their 'pariah' status and deciding to go for it
and build it all by themselves. Cockroaches?

How should I put this? This situation is like a river flowing across the
plains. The river-bed gives shape and path to the flowing water, but flowing
water too, in the long run, gives shape to the river bed and alters its
course.

 _Role of premise - C_ : There is role of who gets in, how many get in and how
they do it. Given that the size of batches have gone up, I do believe that
number of sentences exchanged with PG/partners per startup must have gone
down. Or it is skewed between the white and black swans. And that could be a
huge set-back for some. Make-or-break fluctuations are so tiny and yet so
important. Even though this is a scalability challenge for an accelerator
program like YC, but I guess there has to be a hard limit on how many are
taken in. Which is bad because there is no limit on the number of applications
though.

I guess writing more on this will take a lot of time. These are some of the
thoughts which I am sure are well understood at the combinator. It's just an
outside-in view from where I am coming from.

[1] <http://techcrunch.com/2012/08/18/how-instacart-hacked-yc/> [writing in
progress]

~~~
pg
"Given that the size of batches have gone up, I do believe that number of
sentences exchanged with PG/partners per startup must have gone down."

I didn't read this whole comment, but that part at least is false, because
we've hired new partners at a higher rate than batches have grown. We now have
5 people doing for 50-startup batches what I used to do alone for 20-startup
batches.

~~~
ewoodrich
A reasonable heuristic. In which case, what was the ratio of sentences read to
ignored in this particular instance?

~~~
crimsonzagar
Looks like hn_id of monsterix has been banned. Didn't expect this from site
admins because what he said above was within quality of discussions normally
seen here, and his questions are genuine.

It's kind of sad that admins are unable to take criticism or face real
questions and are overreacting to it.

~~~
tokenadult
There was a log-in code change on HN today that made a lot of people think
they were site-banned,

<https://news.ycombinator.com/item?id=5650171>

but in fact they were not. The comments of the user you mention do not appear
dead to me (I have showdead turned on).

~~~
monsterix
I am pretty much back in. Yes, there was some problem last night and some of
the lines I edited/wrote got lost when I hit submit. Couldn't login for a long
time thereafter, and unfortunately misunderstood the situation.

