
Paul Graham's Letter to YC Companies - emilepetrone
Jessica and I had dinner recently with a prominent investor. He seemed sure the bad performance of the Facebook IPO will hurt the funding market for earlier stage startups. But no one knows yet how much. Possibly only a little. Possibly a lot, if it becomes a vicious circle.<p>What does this mean for you? If it means new startups raise their first money on worse terms than they would have a few months ago, that's not the end of the world, because by historical standards valuations had been high. Airbnb and Dropbox prove you can raise money at a fraction of recent valuations and do just fine. What I do worry about is (a) it may be harder to raise money at all, regardless of price and (b) that companies that previously raised money at high valuations will now face "down rounds," which can be damaging.<p>What to do?<p>If you haven't raised money yet, lower your expectations for fundraising. How much should you lower them? We don't know yet how hard it will be to raise money or what will happen to valuations for those who do. Which means it's more important than ever to be flexible about the valuation you expect and the amount you want to raise (which, odd as it may seem, are connected). First talk to investors about whether they want to invest at all, then negotiate price.<p>If you raised money on a convertible note with a high cap, you may be about to get an illustration of the difference between a valuation cap on a note and an actual valuation. I.e. when you do raise an equity round, the valuation may be below the cap. I don't think this is a problem, except for the possibility that your previous high cap will cause the round to seem to potential investors like a down one. If that's a problem, the solution is not to emphasize that number in conversations with potential investors in an equity round.<p>If you raised money in an equity round at a high valuation, you may find that if you need money you can only get it at a lower one. Which is bad, because "down rounds" not only dilute you horribly, but make you seem and perhaps even feel like damaged goods.<p>The best solution is not to need money. The less you need investor money, (a) the more investors like you, in all markets, and (b) the less you're harmed by bad markets.<p>I often tell startups after raising money that they should act as if it's the last they're ever going to get. In the past that has been a useful heuristic, because doing that is the best way to ensure it's easy to raise more. But if the funding market tanks, it's going to be more than a heuristic.<p>The startups that really get hosed are going to be the ones that have easy money built into the structure of their company: the ones that raise a lot on easy terms, and are then led thereby to spend a lot, and to pay little attention to profitability. That kind of startup gets destroyed when markets tighten up. So don't be that startup. If you've raised a lot, don't spend it; not merely for the obvious reason that you'll run out faster, but because it will turn you into the wrong sort of company to thrive in bad times.<p>--pg
======
pg
Note incidentally that I'm talking about the performance of the IPO, not the
performance of Facebook itself. I think Facebook as a company is in a strong
position. The problem is simply that Mr. Market
(<http://en.wikipedia.org/wiki/The_Intelligent_Investor>) doesn't think so at
the moment.

~~~
Alex3917
Out of curiosity, why is it that Facebook's IPO would hurt early stage
valuations, when all of Facebook's early investors made hundreds of millions
or billions of dollars? I could see it getting harder to IPO at a good
valuation for a few years, but that shouldn't drive down early stage
valuations all that much. Also, to me the most interesting thing to watch
(beyond Spain) is these new crowdsourcing laws going into effect January 1st.
That has the potential to drive hundreds of millions of dollars into the angel
space overnight, sending valuations through the roof or at least keeping them
propped up for a while.

~~~
po
I suspect it's because investors think that one of the few routes to 'exit' a
company and cash out your investment just got closed down, at least in the
short term. That increases the risk of investing and therefore lowers the
valuation.

~~~
agotterer
In the next few months Facebook will create over 1000 new millionaires. Is it
to much too assume that many of them will get into inventing, which could
actually cause the opposite affect of what you're suggesting where there is
even more money available?

~~~
ppop
At the rate FB is falling, there won't be 1000 new millionaires by that time

~~~
jeffreymcmanus
If you do the arithmetic, yes there will. At any rate, you don't need to be a
millionaire to do venture investing.

~~~
ppop
At the rate FB is falling, it will be worth less than 12 billion in 3 months.

~~~
lachlanj
It's these kind of forward projections that cause booms and busts, ie. people
assuming that housing prices will increase at a steady/regular rate over time.
Just as we saw that this doesn't happen in a steady way, nor will facebook
steadily decline over the next 3 months.

------
9oliYQjP
It's very possible that the Facebook IPO came early enough in this bubble to
actually prevent a huge disaster. I did not like where things were headed with
most startups in the past couple of years. The Facebook IPO was like a fire
extinguisher that happened to contain a small fire before it got way too out-
of-control.

If your startup has no business model, you better think of one fast. If your
startup has no revenue or a lack of it, you better start generating a lot more
really soon. If your startup has a solid business model and is cash-flow
positive, it's time to start leap-frogging the competition and adjusting the
course. This is the time when good companies become great ones.

------
ericfrenkiel
I read this with a heavy heart, especially after working at Facebook before my
current startup.

Facebook is an amazing company with some of the best people in Silicon Valley
working to make Facebook a once-in-a-generation company.

But if Google debuted at $25b, and grew into a $200b company, how can Facebook
grow by a similar multiple starting at a $100b valuation?

In my opinion, opening at $38/share sucked all the oxygen out of the room, in
the IPO market, especially the later stage market, and potentially downstream
as well.

Instead of debuting at $50b or even $75b, the delta was the price of the
collective hope of entrepreneurs and early stage startups everywhere.

Because at the end of the day many investors will ask, "If even Facebook
couldn't do it, who can?"

The price of leaving a little money on the table for most retail investors
would have been worth the good will and Facebook's reputation. Because
Facebook really is a great company that is doing and will continue to do great
things, but PG is saying the air is gone, and no one knows if more will come.

Is all this a bad thing? Perhaps more companies should be valued based on
revenue in stead of API calls/month etc.

~~~
astrodust
It's important to remember that pre-IPO Google was a vastly different company
than post-IPO Google. It wasn't just the Eric Schmidt factor, which cannot be
ignored, but the way the company seemed to position itself. With billions in
the bank they could take more risks, explore new markets, and branch out in
somewhat unpredictable ways.

In 2004 Google Maps didn't exist. Android was an independent entity. The
Google server farms were still few and far between. It was a search-based
advertising company and nothing more. You could argue they're still
fundamentally the same, but that's just because they have a rock-solid
foundation to expand from.

Facebook in 2020 could be a completely different company and who knows, maybe
a $500B one.

~~~
netcan
Maybe, that's a possibility.There is a very good possibility that Facebook
will be in the same range as Google or Apple. an if any companies have a
chance at $500b in 2020, Facebook are probably in the run. It's just not all
that likely.

There is also a possibility that Facebook won't be able to monetize with the
same effectiveness as Google. It's also possible that Facebook will have fewer
active users in 2020.

Valueing a company purely in terms of its current cashflows and assets without
taking into account its potential is wrong. I'm not saying that. Companies
have quality and Facebook is absolutely a quality company. This way of
thinking about businesses (good companies & bad companies) is rightly
ingrained in the way we talk about companies. Talking about them as over/under
valued companies seems shortsighted and it is, especially if you are talking
about startups. When good startup investors make their most hopeful
investments, valuation comes second.

This is also true of bigger companies. Google has quality that Yahoo doesn't.
Facebook has quality that Groupon doesn't. Warren Buffet evaluates companies
this way - great companies at a fair price.

 _but.._

every rule of thumb has a reductio ad absurdum. "Valuation doesn't matter if
the company is a great company" only goes so far. The way Facebook was/is
valued takes into account their potential to grow like Google. It takes into
account their potential to be the biggest company in the world. It _doesn't_
take into account their potential to fail. The way its priced even defines as
failure outcomes that should be defined as success. If Facebook can double its
profits every 3 years for the next 10 years they'll probably still be a
moderate failure for those who bought at $100b. If they double every 5 years,
it'll be a bomb.

------
Smerity
To those having fun saying "pop", contribute value not onomatopoeia.

The clearest message in PG's letter is simply "The startups that really get
hosed are going to be the ones that have easy money ... So don't be that
startup."

If you have a viable business then you can either a) proceed without venture
capital or b) prove yourselves enough that you'll get the terms you need. Yes,
(a) may make you move slower, and (b) means that potentially brilliant ideas
that have a bright side just past the edge of horizon are more difficult to
get off the ground, but this has always been the case.

One of my mentors always quotes "you don't know the value of your captain
until you hit turbulent waters". These are our turbulent waters. For those of
you ready for it, this is a time of opportunity.

------
jayzee
So here is an idea for an email feature/gmail plugin: 'Semantic Scramble'
Basically, any sensitive email that you send to a bunch of people is
automatically scrambled (retaining original meaning/correct grammar, just a
small shuffling of words) so that each person gets a unique email. Easy to
find out who leaked it. You could add a similar unique jitter for sensitive
photos/images...

~~~
cdixon
The canary trap.

~~~
eddie_the_head
This is how the music industry does it with material they send out to
different parties like reviewers or magazines with tools like Haulix, except
they use watermarks that are undetectable to the ear but encoded in the file
itself.

Wrt email however, I don't think Paul really minded that it was leaked or just
realized it was futile to stop it, perhaps that's why he un-killed it.

------
cdixon
This happens every couple of years in tech. I've personally witnessed 3
downturns now. One was real and two were arguably the best time to start
companies. Raising money might be harder, but generally only for bad
companies.

~~~
waterlesscloud
Why would they be good times to start companies? Less clutter for investors to
sort through and more available talent?

~~~
cdixon
Mostly: Less competition for users (e.g. there are 600K iOS apps now - too
many), and easier to hire (main alternative right now is to get funding and
start a company).

------
pbiggar
When I saw PG's email, I thought this was a self-fulfilling prophesy, even if
it was only seen by YC founders. But now that every has seen it - it will be
in Forbes and TechCrunch soon no doubt - it seems almost certain.

If just YC founders see it, then they'll take less money, and get lower
valuations, etc, leading the tone of the valley. But if everyone sees it,
investors will close their wallets, people will declare the bubble is now
popped, and the prophesy will fulfil itself.

~~~
wavephorm
Only the Social Network bubble is popped -- which is the majority of companies
that YCombinator funds. Social network websites that can be built in 3 months
and have zero paying customers or any potential profitability really shouldn't
have existed in the first place.

~~~
pbiggar
I'm not sure where you get your information, but it looks like you didn't read
pg's email or my comment.

~~~
silentscope
catty

~~~
pbiggar
They're trolling, the best response is calling it out.

~~~
silentscope
I was calling the comment above me catty, which it was. I'm not trolling, but
trying to convey that sharp sarcasam doesn't really ad much to a conversation.
If people want to downvote me instead of the sarcasm, that's cool (I just
don't necessarily understand it).

~~~
pbiggar
Sorry, miscommunication. waveform was the troll, not you (though I dont think
adding single word replies ever adds to the conversation on HN).

~~~
silentscope
point well made. I could've been more elaborative.

------
zinssmeister
I am not sure what will cool the investment climate more. The fact that
facebook's IPO was a disaster or that PG sent this letter and recommends to be
cautious.

~~~
veyron
Facebook IPO disaster, coupled with Yelp and Groupon and the others, is the
real death knell. PG's letter merely states the obvious.

The goal of the VC game is to get 10x+ returns. That only happens for early or
mid-stage investors if there are investors down the line investing at higher
valuations. Those late stage investors depend on the IPO exit. If the late-
stage investors lose confidence (which is what appears to have happened), the
mid-stage investors lose confidence and thus the entire market contracts.

From the other side, the entire wall street game is crashing. People, for
better or for worse, are convinced that the entire equities game is a sham.
Volumes (which lead to commissions and revenue for the firms) are down in all
of the asset classes, and the bonds have reached near-ponzi yields (swiss
bonds actually have negative yield, which means investors are actually paying
interest ...), so the "retail investor" who traditionally buy into the IPOs
aren't playing a significant role anymore

~~~
markmm
But PG's argument is the Facebook IPO will put off investors investing in
__startups__, this is the very definition of early investors, which for
facebook has made a few billionaires and many millionaires.

~~~
veyron
You have to work backwards. The penultimate round of investors depend on
future investors to buy in at a higher valuation. The third to last group
depend on the second to last group. And you can walk this all the way back to
the seed stage. If there are few people left at the end to buy up the IPO then
the late stage investors dry up and the ripple works its way back to the seed
and angel rounds.

------
sroussey
Facebook waited too long. Part of the psychology on joe public's love of Apple
has to do with APPL -- they got to invest in the stock while investing their
time (and $) in their products.

Facebook decided to have all that growth in value for insiders only. And it's
not like they wanted to be a private company, so the outcome is planned.

By not leaving any money on the table, and having joe public not share and
invest in their success, when the government starts to beat down on them,
there won't be much public support for FB.

And pg is right: nor will there be much support for those following in their
footsteps. Scorched Earth. Those investors did well (and many HN peeps on
SecondMarket). So well in fact, it won't happen again. Not for a long while.

~~~
AndrewWorsnop
Mmm, I disagree about psychology of investing stock, time and products
together - in Aus, there's a lot of Apple love but little investment in it's
stock. Doesn't harm the brand... In the end, investors may like a good stock
but customers just like a good product.

------
hsuresh
Bubble 1.0 - Just have a prototype, and money will follow you.

Bubble 2.0 - Ship a product, make sure you have enough users, and money will
follow you.

Post this bubble, is it going to be: "Make profits, because that is where your
money is"?

I am not implying bubble as a bad thing, fwiw.

edit: grammar

------
andr
Am I the only one thinking that Facebook's IPO was actually a success? The
point of the IPO is to sell your company shares at the best possible price and
Facebook did it.

Compare to an A/B/C round for a startup. If you know investors are willing to
pay $50m for the round, but you settle for $25m, then you just lost $25m and
gained nothing.

I think the main reason FB is falling now, is not because the stock was not
worth $38, but everyone that expected it to quadruple overnight is now
selling.

~~~
rondon1
On day 1 it was a success, but now it is a disaster for several reasons.

1\. It is harder to attract people to come work for you when you company's
valuation is going down. Obviously FB can afford to pay for talent, but that
cost just went up.

2\. If FB ever needed to get more investment money, people may be more
reluctant due to this situation.

3\. If your company was getting acquired by FB would you want to be paid in
cash or Stock?

------
gojomo
The FB IPO sends a signal that certain exits are about 35% less lucrative than
the most enthusiastic might have thought. And, the IPO wasn't the 'starter
pistol' for another frenzy. I think the memory of 12 years ago hasn't faded
entirely yet, and there's so much other uncertainty in the economic world no
one can be a runaway optimist.

But the IPO results might actually boost certain kinds of deals. For example,
would you rather sell your company to FB for $X million of FB stock when that
stock is at 45 or when it's at 26? (Of course X is larger when FB is flush,
but I doubt X goes down linearly with FB market-cap when there are other
bidders. And psychologically, it may be easier to think FB grows 50% back into
its peak, than 50% more above its peak.)

If there had been an indiscriminate frenzy, everyone knows that ends in a
crash. When everyone's instead been reminded that companies are different --
FB isn't GPRN isn't AAPL isn't LNKD -- and the particulars of value and model
matter, that's better for a sustained boom at a more measured pace.

------
_pius
This will probably be a self-fulfilling prophecy.

------
JustNick
"The best solution is not to need money."

This always is a good rule for any kind of business. not only about startups.

Paul, you're trying to explain basics of business processes.

In YC application, Faq there is an item in which you're asking to state is
there any programmers in startup team, and explaining that if not, you better
should have one. I think you should add one more item, on which YC team should
have experienced and successful project manager, businessman who make startup
profitable and successful.

------
gfodor
I am confused why the FB IPO is considered anything other than a failure of
bankers to price the stock correctly. Did anyone who actually understands
Facebook's business today expect it to maintain a 100B valuation? Did any
institutional investors throw money into it hoping it would rise up to 150B?
If you invested in Facebook at the 150 P/E or whatever absurd value it was you
deserved to get burned and hopefully are not investing in startups.

------
NichCarlson
I note that BI is called a "cesspool" in these comments, and that this email
has been posted here so that you don't have to send any traffic to us.

Just so everyone is aware, you'd not be reading this email right now if us
cesspool-splashers hadn't done the hard work of getting a copy and posting it.
Now, by not linking to us, you are essentially punishing us for that work. I
suppose you'd prefer a world in which you hadn't read this email.

------
paulsutter
The problems in Europe are a more severe weight on the market (whether
generally or for tech stocks specifically). By any rational logic, the
Facebook IPO went well:

\- the company raised a lot of money at a good price,

\- the company remains valued at a high multiple (ie, even today valued on the
dream not on the numbers), and

\- I can imagine no better antidote for bubble muppets than the performance of
the IPO

Bubbles can be fun but they're not healthy. Recent events are far better than
a crash. It's just a correction. The emotional hand-wringing will last about
as long as it always does, and be forgotten just as it always is.

Events in Europe may turn out much more severe than the minor impact to date.
And they may not. But that's a bigger concern than the over-valuation of
social companies.

------
capdiz
"The best solution is to not need money. The less you need investor money, the
more investors like you". That's true if you are dropbox, airbnb and other
startups that have a solid revenue avenues other than advertising. If twitter
or facebook itself had been founded after that disastrous ipo (facebook ipo)
they would be in a worse position than dropbox or airbnb in terms of funding
and revenue. That said, i think facebook will get to its intended valuation
within this year.

~~~
blendergasket
There is a fundamental problem with the way the web is working now. We're in a
kind of limbo. Companies like Dropbox and Airbnb (and the company I mostly
work with) actually sell a product and as you say they're good.

I've been having a hard time formulating what I'm about to write so I
apologize if it doesn't make a lot of sense. I can't help feeling that the
Facebooks and Twitters are using the web in a way that there really isn't a
proper infrastructure for. They seem to be quite expensive to maintain and, by
nature don't generate lots of money by what they do. In my opinion, if they
charged they wouldn't be able to build the big networks of interconnected
users that defines their value.

I think there are ways past this conundrum but I don't think that profit
motive will be the what pushes them and I think they will require a somewhat
different infrastructure than we have now.

------
dm8
With the risk of getting downvoted; why this letter was made to public? I
think it was meant for YC companies only. FB IPO has nothing to do with early
stage investing. It may be a good thing that IPO didn't pop. We've averted a
major bubble. But making this letter public made situation even worse. Now all
the investors will rethink their investments. Why? Because PG (of all the
investors) has said it will be hard to raise money.

And expect Business Insiders, Venture Beats of the world to spread doom and
gloom. After all it will attract more eyeballs. RIP good times indeed.

Edit: grammar and minor changes

------
limeade
Can someone explain the perception that Facebook's IPO was a disaster? Doesn't
the fact that the stock has not risen mean that the offering had the correct
price?

~~~
rdl
Opening at 38 and staying in the high 30s/low 40s would be reasonable. Maximum
value for FB, Inc., stable price.

Dropping to 26, not so much.

~~~
hncommenter13
Remember that 26 includes the value of $9B of additional cash on the balance
sheet from the IPO. So the valuation of Facebook as a business is actually
lower still, once you back out the cash.

------
dr_
Interesting but Facebook was absurdly valued to begin with. At nearly 100
times earnings, it seems to me that Mr. Market actually responded
appropriately for now.

Facebook has already been monetizing using traditional revenue streams (ads)
and there doesn't appear to be much left to do there.

They may have another ace up their sleeve, but it's not Wall Streets job to
guess that they may.

------
jmspring
I have been mixed on this, and I think it will have an interesting impact on
the IPO markets.

But, one area that I am still waiting to see play out is the intersection of
secondary markets and IPOs. People have raised the examples of Groupon, Yelp,
and FB (Zynga is another that comes to mind). All social, yet all different.
Groupon has had some interesting accounting practices along the way, FB was
richly priced by the secondary markets.

I have yet to see any big name, non-social, companies really test the markets,
and I mean when they are in a position to do so -- strong product, strong
revenues, and strong path moving forward.

Given what is happening in Europe and the world markets in general, there will
be an impact on investment.

There have been basically 3 downturns (as I believe cdixon mentioned) in the
last 12 years, is this the 4th? Or is this a by product of new avenues like
the secondary market?

I have no idea, but it will be interesting to see how it plays out.

~~~
jwerlin
DWRE? BV?

------
silenteh
This is not necessarily a bad thing for the new startups, in my opinion. I
want to quote PG from his essay: The top idea in your mind (my favorite one
btw)

{...} I'd noticed startups got way less done when they started raising money,
but it was not till we ourselves raised money that I understood why. The
problem is not the actual time it takes to meet with investors. The problem is
that once you start raising money, raising money becomes the top idea in your
mind. That becomes what you think about when you take a shower in the morning.
And that means other questions aren't. {...}

This is actually how it works, and more or less always worked here in Europe.
No investments, no money raising, only part of your daily job salary invested
in your startup ideas, and endless nights learning, coding, failing in a
loop....till you succeed and you start to make money.

------
cperciva
_because "down rounds" not only dilute you horribly..._

I'm missing something here. What makes "down rounds" so dilutive? I'm assuming
we're talking about a larger effect than the obvious "lower valuation =
handing over more stock to raise the same amount of cash" effect.

~~~
diego
The investors in the initial round usually have some sort of anti-dilution
provision, so the founders get diluted much more. See this, for example:

[http://www.businessweek.com/smallbiz/content/jan2009/sb20090...](http://www.businessweek.com/smallbiz/content/jan2009/sb20090123_008974.htm)

~~~
cperciva
Ah, thanks for explaining. I thought such anti-dilution provisions would have
gone out of style a years ago.

------
nhangen
I think this is a good thing, as startup valuations are already frothy,
especially when based on users instead of earnings.

Perhaps this is what's needed to bring the game back to reality so that
everyone can prosper.

------
scootnetworks
Asserting that the decline in Facebook's stock price post-IPO has
generalizable implications for early stage companies is helping the tail to
wag the dog.

I agree with Fred Wilson that Facebook's present valuation should be a thrill
to its early investors, not a chill <http://www.avc.com/a_vc/2012/06/some-
perspective.html>.

It is natural to see personal meaning in well known events. Venus is passing
in front of the Sun right now. Seems like a good time to call some investors.

------
bootload
_"... But no one knows yet how much. Possibly only a little. Possibly a lot,
if it becomes a vicious circle. ..."_

The email is counter-intuitive because being truthful and signalling a
possible crunch speeds up the observation. It also gets you trampled as the
herd looks at the lead changing directions ~
<http://news.ycombinator.com/item?id=4067278> but it also forces teams to
_'adapt'_ quickly.

------
heuristo
FB is a healthy message. Before the IPO it has been noted that late-stage
financings were feeling out of control in terms of valuation. BDC-based funds
have sprung up to "invest" in the "pop" but don't really help build companies
directly.

Smaller, more focused rounds at lower valuations are probably a good thing. So
is using sites like kickstarter to generate funded ramps for new products.

The more capital efficient you can be the better.

------
abnerg
Late to this thread, but I posted this on May 31:

Facebook: Did they just pop the bubble and screw twitter?

[http://abnerg.tumblr.com/post/24119345098/facebook-did-
they-...](http://abnerg.tumblr.com/post/24119345098/facebook-did-they-just-
pop-the-bubble-screw-twitter)

Two outstanding questions: 1\. Can we be done with the advertizing business
models please? 2\. How much did the Facebook IPO really shift the private
equity market?

------
tomasien
I spend so much time arguing and thinking critically about things that I've
made a decision: I'm just not going to question Paul Graham. It's not worth my
time, he's right enough where it's probably not dangerous and let's be honest:
we all need something solid to lean on. I've realized I've leaned so heavily
on his advice up to this point, so I'm just going all in.

------
timlindinct
Isn't it a bit early for someone like pg to be calling this?

Calling it publicly essentially creates the effect, especially from an
accelerator lead.

~~~
timlindinct
Anyways, at least pg's making more founders angry with FB & Zuckerberg. Only
good will come of that. ;-)

------
lpolovets
To play Devil's advocate for a moment, Facebook's IPO will also create a bunch
of millionaires, some of whom will want to become angel investors. So it might
become harder to raise money from VCs but easier to raise it from angels
because the rising supply of angels will counteract the tightening market.

------
kruipen
So FB clusterfuck of an IPO might end up being really good for them because
now it will be much easier to hire...

------
joshfraser
Many of the people I know at Facebook are talking about getting into Angel
investing or starting their own companies now that they have money. I'm most
worried about all that seed money flooding the market, making it even harder
for existing companies to find good talent.

------
Tichy
Isn't it the case that there simply is too much money and at the end of the
day, people seem to be desperate to invest it somewhere? I think that is a
reason why most stock market crises don't seem to last very long.

------
elomarns
"The best solution is not to need money". Best advice on this post.

------
damienh
As wise as a Warren Buffett letter to shareholders. Thanks, Paul.

------
rshlo
Or just don't raise money and bootstrap from the ground's up.

------
jpcorica
In argentina there's almost not other way. BTW MG Sielge wrote about the FB
IPO and said it was bad for short sight bankers but good for FB, is he wrong?

------
huetsch
Did you hesitate before sending this out due to the fear that such a letter
might itself push the market closer towards a vicious cycle?

------
rexreed
Thank goodness. Now maybe it just might be a bit easier to find some developer
talent now that the easy money faucet has turned off.

------
CUR10US
"The best solution is not to need money."

"The startups that really get hosed are going to be the ones... that pay
little attention to profitability."

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sameerp1
A post like this probably only helps push along the vicious cycle :) Not
saying it shouldn't have been posted, but it's ironic.

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Nikkki
PG's message sounds too alarmist. Facebook has a huge impact on the tech
ecosystem, but FB's impact is I reckon overrated.

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rubyPLAYWITHME
Who is emilepetrone? Did pg really write this?

Also why did this disappear from the front page, and then reappear?

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unimpressive
If he didn't, then business insider was certainly fooled. [0]

[0]: [http://www.businessinsider.com/facebook-fallout-y-
combinator...](http://www.businessinsider.com/facebook-fallout-y-combinators-
paul-graham-just-emailed-portfolio-companies-warning-of-bad-times-in-silicon-
valley-2012-6)

~~~
felipepiresx
funny how people copy paste stuff

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jermaink
I'm sure the Facebook IPO will hit seed/early stage funding less than the SF
housing market :)

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tlogan
I think only problem is that we again got into 2000-dot-com thinking that
"users == money".

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notbitter
Founder shares get diluted in a down round, but employee options go completely
underwater.

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VentureChris
how obvious this post. It just tells we're screwed now by the bad facebook ipo
and find a business model fast. Now the party is not over but the drinks are
getting fewer and the music gets silent. Cheers, Chris.

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dwynings
R.I.P. Good Times 2.0

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jorgeortiz85
R.I.P. Good Time v1.0 ended up marking the trough (not the peak) of the last
cycle.

That said, I have more faith in pg's market timing abilities than in
Sequoia's.

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wilschroter
I think this advice is useful in just about all times.

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felipepiresx
word up pg. Let the winter come and lets see who can ski.

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lightyrs
This seems ethically dubious.

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snikolic
I don't agree with the parent comment that I'm replying to, but I think this
is a healthy skepticism to have. I don't think it deserves a downvote...

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lightyrs
I appreciate the reasoned reply. I respect pg immensely, which is why I spend
time on this site and why I found the post surprising.

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dmvaldman
Did I hear a bubble just pop?

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RachelF
A lot of people seem to think so.

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markmm
I'm sure Peter Thiel wishes he could go back in time and not invest anything
in Facebook, he only turned 500k into over a billion, but if the IPO went
better he could have made it to 1.5 billion. I agree all those investors that
might have invested in startups will be less inclined because of this. Who
wants a measly billion when you could have 1.5 billion!!???

