
Is Yuri Milner A Threat To Silicon Valley? - ssclafani
http://techcrunch.com/2011/01/29/is-yuri-milner-is-a-threat-to-silicon-valley/
======
aaronsw
"I tell many people that Paul Graham is a genius. He saw the opportunity to
start YC."

This is a very sly insult and betrays a major misunderstanding of how the
market works. Did Facebook succeed because Mark Zuckerberg saw the
"opportunity" to start a social networking site? Did Dropbox take off because
they saw the "opportunity" for file synchronization? The idea is nonsense.
These things succeeded not because their creators were the only ones to see
the need (they weren't), but because an incredible amount of time and talent
was put into making them successful.

When YC started, everyone said the idea was crazy. It still is. It's worked,
like any startup, because of incredible execution -- not because it stumbled
into a waiting opportunity.

~~~
nostrademons
I think it's more of a soundbite than a misunderstanding. Yes, Facebook _did_
succeed because Mark Zuckerburg saw the opportunity to start a social
networking site. Dropbox did take off because Drew saw the opportunity for
file synchronization. It's just that they succeeded for many reasons _besides_
that initial opportunity.

In a one-sentence press soundbite, you can't exactly enumerate all the things
that the founders did right. But that doesn't make the "opportunity" part
wrong. It's just one of many necessary-but-not-sufficient conditions that the
founding team managed to nail.

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mlinsey
Just last year we were talking incessantly about how angels and super-angels
were disrupting VC's in the area of early stage investments in a big way. Were
the super-angels a "threat to Silicon Valley" back then? Nobody thought so
except maybe a few VC's in private.

PG predicted/observed in his Startup School talk that the way VC's could
strike back was to throw around more money at higher valuations than the
angels were really comfortable with, since the total risk exposure was a much
less big deal to them. The Milner deal is exactly that phenomena taken to its
logical conclusion.

Also, the fact that Silicon Valley's most prominent angel is co-investing with
and managing Milner's investment should be all you need to know to realize
that this is a lot more complex than "Milner is destroying the angel
ecosystem"

~~~
brandnewlow
Sounds like PG's talk was a great way to fish around for someone to offer YC
companies an offer like this. I wonder sometimes how much his "predictions"
are aimed at bringing favorable conditions into being.

~~~
Harj
We weren't expecting anyone to make an offer like this. Even if we'd had this
idea ourselves, which we didn't, we would never have believed anyone would
actually be ballsy and decisive enough to do it.

~~~
spitfire
Really? This was pretty easy to see from miles away. It's a simple investment
strategy - YC does the weeding for them, they throw a bit of cash at each
company and get a much better return. I've been wondering why people haven't
been doing this for a while.

~~~
ericd
Even if it makes a lot of sense in hindsight, it's still a pretty radical
departure from what's been done before in the funding game. It certainly
wasn't obvious to everyone that it was coming.

These terms are a lot more entrepreneur-friendly than what's been the norm,
and if they weren't so friendly, it wouldn't necessarily be a no-brainer to
take it, and this wouldn't be such a big deal.

~~~
spitfire
Okay. Well for the future then: When you see someone being successful at any
trend, piggyback on them. The lets you piggyback their research and hard work,
but participate in the upside. If Anna Wintour says leggings are in, they're
in. If Warren Buffett starts buying up aerogel companies - get in! If PG
anoints some dotcoms, drop some pocket change on them all.

NB: This is regardless of whether you agree with the trend or not. I think
leggings are hideous, but I won't argue with Anna Wintour. This is purely
business, personal feelings have no place here. If someone is throwing out
information asymmetrically (They're talking, you're not) take it.

~~~
ericd
Yeah, not bad advice for investing, especially if the bandwagon effect is
strong there. Just don't be the last one in.

------
mindcrime
_But I don’t want Paul to be one of a small group of people who decides which
companies get funding—not because he isn’t smart (he is) or a great guy (he
is). When it comes to innovation, central decision-making is bad, no matter
how good the decision-makers are._

I don't get this POV. It's not like YC is the only place to find companies
that are worth funding by angels. Getting "pushed out" of the "YC ecosystem"
is not the same thing as getting "pushed out" of the "startup ecosystem" as a
whole. If you find that you can't invest in the YC companies anymore, find
another incubator to work with, or deal with startups on an individual basis.

~~~
rodyancy
Consider what this guaranteed $150k will do to other incubators. YC is going
to be so much more attractive to other incubators, the best startups may not
bother to apply to other incubators.

Sure, there will be winners that go through other incubators, or no incubator
at all, but this is definitely going to tilt the field towards YC.

~~~
jacquesm
YC _still_ has limited capacity so that point is simply not valid. If you're
not one of the lucky few to get in to YC and you want to do a start-up then
you'll have to do without them.

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spydertennis
"The irony is that the DST/YC deal didn’t have to cause problems for
independent angel investors. If DST simply committed to providing $150K to
every YC company, at whatever terms were determined by the lead investor in
the syndicate, DST wouldn’t be pricing the angels out of the ecosystem."

I don't really see how this is pricing angels out of the ecosystem. SV/Yuri
isn't taking the whole funding round for themselves (though they might in some
cases, who knows?). Nothing is stopping other angels from continuing with the
same terms they have been giving. Start ups raising a typical angel round
(400k-1 mill) will still need more than 150k. With the 150k blanket investment
it just means YC startups can wait longer to ask for it. Which is similar to
what the original YC investment meant. This simply seems like an extension of
their philosophy. I'm sure they did not lock themselves into anything and if
this turns out to not be a good move (and they have lots of data to figure it
out) they will iterate.

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gyardley
Good lord, you'd think he was being forced to agree to convertible notes with
no caps with a gun to his head.

I can see there being a little more pressure to do no-cap convertibles on very
competitive deals, but there's nothing preventing him or any other angel
anywhere from continuing to offer terms they're more comfortable with.

------
zende
The reality is that the biggest competition for silicon valley angel investors
is _not_ Yuri Milnur but Google, Facebook, Apple, Twitter, and Zynga.

pg says it much better: "Investors all compete with one another for deals, but
they aren't one another's main competitor. Our main competitor is employers.
And so far that competitor is crushing us. Only a tiny fraction of people who
could start a startup do. Nearly all customers choose the competing product, a
job." [<http://www.paulgraham.com/future.html>]

Here's to hoping more college grads join an early stage start-up or start
their own company instead of joining Google or Facebook

~~~
6ren
Great point, this will expand the pie (of people starting startups).

------
wheaties
I found this article to be interesting reading coming from the side of someone
who can't invest in the same manner of Yuri. However, what wasn't said is that
angles will just have to look elsewhere to find the gems that YC passed over.
Perhaps, and I'm hoping this happens, they'll need to look in places outside
of the valley. Areas like Boulder, Colorado; Chicago and even Ft. Myers,
Florida. Yuri could single handedly be influencing angles to start something
new in a whole new place.

~~~
jdp23
All of those areas already have angel networks. Angel investment has
historically had a big geographic aspect; it's very hard for most SV angels to
add as much value to a Seattle-area startup as a Seattle-area angel.

------
johnrob
Angels need to stick to what they're good at: risk taking. In today's
ecosystem, the reality is that the startups leaving YC are not as risky as the
others. The new 150k plan is simply the market's way of reflecting this. If
angels instead focus on the non-YC companies, they should get the same terms
and rewards as they have been.

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patrickgzill
Talk about linkbait - assuming there are 100 YC companies funded each year -
that is $15 million.

Oooh scary ... I am sure that everyone in SV is checking the Help Wanted
section due to their imminent layoffs..

~~~
jeffreymcmanus
Amateur angel investors aren't worried about the absolute amount of money so
much as the terms. If this becomes the new normal then other angels will be
forced to emulate it.

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jdp23
Investor says his competition is a threat. Film at 11.

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danielharan
"folks like me need to be able to invest at reasonable valuations"

Welcome to capitalism: no one has a guaranteed business model. Music label,
newspaper, angel investor: you can all be disrupted.

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alikamp
A Threat? One things for sure, If an investor does his investing averagely,
sticking to industry protocol and so forth then that investor can expect
average returns. Thats all fine and dandy, but doing things differently will
get different results. In Yuri's case its obvious hes banking on having at
least 1 stellar investment per round. If anything Yuri understands the coming
net boom and is posturing well to take advantage of that fact. Yuri just upped
the performance bar for the rest of the investors out there.

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pclark
Pretty sure DST isn't involved in this?

~~~
dshankar
They're not. It's Yuri Milner investing personally.

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fromRussia
Are You Interfacing with the Russian Mafia & KGB?
[http://www.thenewamerican.com/index.php/usnews/politics/4346...](http://www.thenewamerican.com/index.php/usnews/politics/4346-facebook-
are-you-interfacing-with-the-russian-mafia-a-kgb)

Also see <http://news.ycombinator.com/item?id=2155637>

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davidedicillo
Also, with all the love and respect I have for YC, let's not forget that YC
startups aren't all the startups in which investors can invest. They can grow
some balls and go with startups they think will be successful and not just
betting on the ones pre-screened by YC.

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jacquesm
It never was about the angels, it always was about the start-ups. If you don't
see it that way, don't be an angel investor. Or grow some balls and dare to
drop more than a few thousand on a promising project.

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what-to-do
This title and article is nothing more than a LINKBAIT. Two thumbs way down!

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chailatte
Yes. It's Goldman Sachs tainted money.

