

WSJ interview with Paul Graham [video] - jimdeterman
http://online.wsj.com/video/paul-graham-y-combinator-startups-graduate/D4CAE29C-7FA5-4213-9C3D-5B2EA86B4016.html?mod=WSJ_Tech_videomodule_1

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pg
I like this interview because I was in a really good mood when Peter shot it.
The startups had just finished the second (of three) demo day sessions, and
they had all just nailed their presentations. I was so relieved. You can see
from their body language in the background that they're all happy too.

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jeromec
And to think Paul Graham initially resisted investing. He seems to know this
stuff so well it seems natural.

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pg
Well, I've been doing it full-time for 5 years now. And at the scale we
operate on, 5 years is a lot of data. 172 startups is several times the number
a VC partner would deal with in his career.

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neilk
That's interesting. I just finished a biography a friend of mine wrote about
his life as an accidental cheese-seller, and he mentions that he became an
expert in just a few years, simply because he tried everything every vendor
had to offer. Pretty soon he was at least as expert as any vendor, and often
more knowledgeable.

It's funny how much of life is just about putting in the hours. Maybe we'd
like to think it's about talent or brainpower, but data wins pretty much every
time.

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jeromec
My point is more about being good at something naturally. For example, I think
Michael Arrington was always a natural to write Techcrunch, even if he never
started it. Tiger Woods seems to be natural at golf (not that he didn't work
hard, but many people work hard). I believe Paul Graham is a natural at Y
Combinator in the same way.

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neilk
> Many people work hard.

I don't think that's quite true.

Often one finds that the top performers in a field have some practice regime
that stuns even other professionals.

I don't know how to evaluate the question of whether Paul Graham is somehow
naturally better at this than others. There's clearly something about him
that's different, or he wouldn't be doing what he's doing. But to guess at
what those qualities are -- that endeavour is so vulnerable to confirmation
bias it's practically void of meaning.

Or you could just shrug and say that by now he's seen hundreds of proto-
startups. For whatever reason.

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Kliment
How does the "no soup" provision work in legal terms? How do you (pg and co)
ensure you don't get diluted in future rounds?

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pg
We have protections against arbitrary dilution, by e.g. issuing extra stock or
doing a new round that values the company at $1. We've never needed them. What
I meant by the "no soup" remark was that we don't care that much about legal
protections; it is a more powerful deterrent that we would blacklist any VC
who screwed us over-- or who screwed over any of the startups.

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falsestprophet
In general, is maintaining a good reputation an adequate incentive for VC
firms to avoid abusing founders or angel investors?

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pg
Empirically, very much so. Stories of investors maltreating founders are not
uncommon in the startup world generally, but they are extremely rare among the
YC alumni.

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davidw
Heh, "no soup for you!"

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njrc
Awesome: "Judging by the reactions of the investors, the recession seems to be
over."

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hristov
That was nice. Although, the interviewer just talked too much. A good
journalist knows how to get out of the way.

I have a question for pg, if he is reading this. You said that about 70% of
the companies exit YC with funding or do not need further funding because they
are already bringing in money. Do you usually return your investment at this
point, or do you wait until a later VC round, or do you generally wait to the
point where the founders cash out to return your investment?

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pg
Like most investors, we wouldn't normally get any return till what in the
business is called a "liquidity event," meaning either an acquisition or an
IPO.

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astrec
Dividends? Or a clear preference for 100% reinvestment in growth and a bigger
liquidity event?

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pg
Technology startups have never paid dividends. There are probably multiple
reasons why not. There might be some way to tweak dividends to make them work
for startups, but I know so little about that sort of thing that I wouldn't
want to speculate.

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astrec
On revision, thanks for deciphering my terse question.

As an aside, I did invest in one web startup which took the unusual step of
returning the entire first round investment by way of dividends prior to an
IPO. Very peculiar and not US based, so I figure your assertion holds.

