
YC Annual Letter 2017 - sama
http://blog.samaltman.com/2017-yc-annual-letter
======
Keverw
> In future years, we also hope to explore how something like ‘financial aid’
> might work for people that need a small amount of capital to help get their
> startup going.

Sounds interesting. I always kinda hated how people fresh out of high school
with zero credit can have so much money handed to them for going to school.
While if they wanted to get a business loan or buy a house they would be much
more scrutinized.

I wonder with that money instead and right mentorship if they could come out
ahead of their peers who used that money for college instead.

I know some people who just go to college because they feel like they have to,
and get degrees they don't even use. Imagine one spending 4 years going into
debt, the other coming out a head with a real world profitable startup. One
thing I always hate about school work is I feel like I'm just doing stuff for
the sake of being graded or being busy. I rather spend my time creating stuff
that's more real instead, learn as I go. There's a bunch of free and even paid
training on-demand on the internet to fill in your skill gap.

~~~
mljoe
Thiel's Fellowship is somewhat based on that idea, a scholarship for NOT going
to college.

I still think college has value, but the costs have been increasing much
faster then inflation, while the value has been declining due to the systemic
efficiencies of acquiring knowledge in the information age. Together these are
making the value proposition worse and worse. I can't judge anyone for wanting
to skip college.

There is a lot more we can be doing as a society to encourage
entrepreneurship. It would be nice if in the future we could let our children
use 429 college savings plans for angel/seed funding instead of educational
expenses. Especially if tuition becomes free in the next 10-20 years anyway.

------
AndrewKemendo
_Companies like Amazon, Facebook, Google, Apple, and Microsoft have powerful
advantages that are still not fully understood by most founders and
investors....This trend is unlikely to reverse without antitrust action, and I
suggest people carefully consider its implications for startups._

I think the "startup community" needs to have a serious conversation about
this [2]. If we agree that machine learning is going to be a major underlying
technology moving forward and that as a result, data is the new Oil [1], then
the top 5 technology companies serve as the new Oil Barons.

It goes further than that actually in my mind, as these firms are disrupting
themselves and innovating as fast if not faster in many areas than small
startups can. They are in every industry and if they can't move as fast, then
they buy the talent or the whole team. Granted, a small team will always move
faster, but I think that these mega corps know enough now to know that they
can pivot on trends if needed.

I do worry about the likelihood of a startup that could beat google, facebook,
microsoft etc... with humble roots. Maybe if a "startup" came in with 100M+ in
funding, but more than likely at this point those companies would be funding
that startup, if only for the intelligence value.

So while "we've seen this before - someone always comes out of nowhere" which
gave rise to the current crop of major companies, it would have to be pretty
left field at this point for a company to compete with the major players
without investment from an arm of theirs. Considering Snapchat is the biggest
IPO in the coming year, I don't have a lot of hope that there will be
something coming through.

[1][http://fortune.com/2016/07/11/data-oil-brainstorm-
tech/](http://fortune.com/2016/07/11/data-oil-brainstorm-tech/)

[2] [https://medium.com/@andrewkemendo/the-ai-revolution-will-
be-...](https://medium.com/@andrewkemendo/the-ai-revolution-will-be-different-
from-the-microprocessor-revolution-cb417d324203)

~~~
pyb
Reading between the lines, wasn't Sam complaining about a trend whereby many
promising startups get acquired way too early ?

~~~
AndrewKemendo
I can't speak for sam but in my mind that is a big piece of it.

If you don't sell, then the big companies don't get bigger. Unfortunately in
that case if you do get big enough despite that, they will just target you and
take a chunk of your market (Instagram Stories vs Snapchat) so that you can't
dominate.

Look, it's brilliant and exactly what every firm should do. The question is
really, if it's a net positive to have 5 companies run everything* in consumer
technology. I don't know but history seems to not like that.

~~~
roymurdock
Oligopolization happens from time to time when productivity growth decreases.
Firms are forced to downsize, merge, acquire and consolidate to shrink the
levels of capital and labor they invested in when projecting forward into a
future with the baseline assumption of higher productivity growth.

ML in its current form - efficiency optimization across a ton of different
vertical industries - is also a reaction to decreasing productivity. If you
can't grow your revenues, you need to shrink your costs, and ML/analytics do
that well.

Once we see a new technology or infrastructure driver that jumpstarts
productivity growth (distributed electricity, refrigeration, plumbing/running
water, public roads, combustion engines, more recently the internet and mobile
phones) startups will be able to once again flourish and will be able to
return to the public markets with their own company/brand rather than look for
acquihire exits as many do in the current climate.

Something that makes sense to me would be some form of basic human
sleep/energy acquisition optimization. We spend 1/3 of our time asleep - is
there a way to use VR/AR to enhance productivity during this time, or to avoid
it altogether without killing us? It seems unnatural, but many facets of our
current lifestyle would have seemed unnatural to someone 50, 100, 200 years
ago.

------
icpmacdo
"Hacker News has 3.4 million users per month and 350,000 users per day, with 4
million pageviews a day. There are just under 1 million registered accounts,
with several hundred added each day. Users post around 1,000 articles and
6,000 comments to the site per day."

First time I have seen those numbers, very impressive. I thought there were a
lot less users.

~~~
kevinmannix
I am sure there are many more lurkers than active participants

~~~
TeMPOraL
This is true of pretty much any Internet community, so not that surprising.

~~~
justinhensley
I think it's especially true here though due to HN's crowd sourced quality
control. The rules are largely adhered to by the user base as well, and it's
not just an agree/disagree button.

------
danvoell
Hi sama, great letter. The only thing I would suggest for the next round is to
identify some misses. What are some RFPs that you tried to solve and didn't
and what are your insights on this? The two annual letters I like the most are
Bill Gates and Warren Buffet. From Bill Gates, I don't mind the endless
optimism since it is a foundation. From Warren Buffet, I expect the ole hoe
hum, we'd be trillionaires if we had seen this trend or we were totally wrong
about this ...

~~~
sama
Thanks! Will add this in next time. Plenty of misses to write about!

~~~
moflome
I you're still reading, I was glad to see you mention the international
funding successes and would like to learn more about the internationalization
of the YC program. Thanks!

------
ridruejo
"Our mission is to enable the most innovation of any company in the world in
order to make the future great for everyone." I know many people will read
that and roll their eyes back and believe it is just a marketing gimmick for
the gullible and like most investors YC just cares about the money. The thing
is that they _do_ deeply care about founders and making things better in the
world, as naive as that may sound to outsiders.

~~~
ForrestN
It's funny you say this—the first thing I did, even before reading the
article, was search for "Thiel." It's going to be hard for me to take this
sort of thing seriously, this telegraphing of benevolence which is so central
to YC's branding, until they address the fact that one of their "partners" is
such an obviously destructive force within society. They don't even have to do
anything but say goodbye, and they won't.

~~~
purple-again
While I disagree with many of Trumps beliefs and by proxy probably many of
Thiels as well the fact that they refused to further the division of our
country by excommunicating him for his beliefs is a huge pro in my book.

The founder of Rails saying he would fire any of his employees that supported
Trump was sickening and that kind of attitude will never allow us to move from
bloodshed and war to one people.

------
nopassrecover
_We are only about 30 years into the age of software, about 20 years into the
age of the internet, and about 2 years into the age of artificial
intelligence_

Which innovations over the last 2 years most indicate a new age of artificial
intelligence?

I undertook some research, and noticed:

    
    
      3 Months Ago: Google Translate AI had a breakthrough
      5 Months Ago: Amazon/Facebook/Google/IBM/Microsoft launch an AI Partnership
      1 Year Ago: AlphaGo has a big win and OpenAI is founded
      2 Years Ago: Google (now Waymo) performs its first public driverless ride
      3 Years Ago: Google acquires DeepMind and interest in Deep Learning takes off
      6 Years Ago: IBM Watson wins Jeopardy
    

All indications suggest increased interest and investment in AI, but from an
external perspective I'm interested to know whether quantitative changes (big
data, cloud infrastructure, GPU processing speed etc.) and increased interest
have genuinely spurred a qualitative new era of AI free of the pattern of "AI
Winters"
([https://en.wikipedia.org/wiki/AI_winter](https://en.wikipedia.org/wiki/AI_winter)).

~~~
hyperpallium
We're about 2-3 years into the latest iteration of neural networks (aka deep
learning), and the first one with practical application. IBM Watson didn't use
neural networks.

------
bartmancuso
Re YC Research, please consider a project looking at the challenges
surrounding climate change communications. To state the obvious, the science
on climate change is settled, but many people are still skeptical/resistant or
in outright denial. Heated arguments and throwing around citations to journal
articles really doesn't change anyone's mind. There is a deeper, nuanced
communications challenge at play, and it's the exact type of thing that YC
would be great at addressing. There are some very interesting ways that
technology (and the creativity of the YC community) could be used to tackle
this issue.

Climate change may be the defining issue of the next century, and it would be
a shame to be stymied by the communications challenges. I hope you'll consider
it.

~~~
nickpsecurity
It's not about nuance. It's just echo chambers reinforced by the media those
in support or denial consume:

[https://en.m.wikipedia.org/wiki/Echo_chamber_(media)](https://en.m.wikipedia.org/wiki/Echo_chamber_\(media\))

Consolidation of corporate media combined with algorithms of biggest, online
providers have really cemented the effect in. Past few years, esp election,
had strongest effects on isolation and reinforcement I've ever seen.

------
blacksmythe

        >> funded over ... 1,470 companies
        >> more than 50 of our companies are worth more than $100 million each.
    

3.4% is a remarkable ratio.

~~~
_sentient
Especially given that those numbers are back-loaded, with somewhere around a
third of all YC companies having been funded within the last two years.

------
notatoad
>I expect that people will talk about software as one of our secret weapons.

can you give a broad overview of what software YC creates? What does it do? is
it internal tracking and stats, or exclusive libraries that YC-funded
companies get to use to build their products?

~~~
burkaman
Bookface is one thing I know of:
[https://bookface.ycombinator.com/](https://bookface.ycombinator.com/)

I think they developed it in-house.

~~~
garry
I wrote it. It was needed because YC had funded larger batches and the hardest
part of a community is knowing who is in it and who you can trust and ask for
help.

------
angersock
Nice writeup sama, but the history is a bit revisionist:

 _> We are only about 30 years into the age of software, about 20 years into
the age of the internet, and about 2 years into the age of artificial
intelligence._

Software has been around--and actively making bank!--for over 40 years. The
internet has been around longer in the form of academic institutions, email,
and BBS than you mention.

And AI has, of course, been around at least as long as software.

I appreciate you have a message to send, but maybe don't ignore the path we
took to get here.

~~~
mvp
Those time periods are what most tech people consider as when those
technologies really took off. And therefore it makes sense to say that. If he
was writing a history of computer science, I agree that it would have been
inaccurate to say that.

~~~
nickpsecurity
An example to support your view might be the switch to the trend of paying to
use server resources like a utility. Centralized resource managed by people
other than users that ran many parties' workloads with metered CPU, RAM, etc
usage. Then, the various devices access it through a standard UI instead of
native apps recoded in many OS's. Quicker setup for new users than rolling
their own. Increased flexibility with the virtualization. Better physical and
online security due to the centralized monitoring.

On the software side, people found that safety, scalability, and maintenance
were important. They needed high-level languages that did things like bounds-
checks or stack protection. They needed the ability to freeze and inspect
errant programs instead of crash them. They needed the software interfaces to
check for right data being passed. They needed to scale on multiple CPU's.
They preferred their OS's to come with source code for easier fixes or
extensions.

Im sure you know all about those two mainframes from IBM (1963-1970's) and
Burroughs (1961) that did those things. Then came to power most large business
and government institutions critical apps to this day. Anyway, I hear people
made incremental improvements doing similar things with x86, Linux, and vastly
lower cost-per-resource. Incremental improvements on capabilities that took
off in the 60's. ;)

------
yawgmoth
On the HN front - I would like to see a discussion and then the implementation
of measures to encourage meaningful discussion, discourage low-effort
comments, but also to discourage "negative lurking". Like other users noticed,
there are a lot of lurkers -- some of which downvote and move along. Because
frequently I do not understand why a post has been downvoted (my own or
otherwise), I am discouraged from contributing. A byproduct of both negative
lurking and the fact that HN has concluded itself to be an intelligent
community is that some readers, including myself, feel judged by the score
next to our comments. There is someone out there reasonably asking "why do you
care?" but it is also important to acknowledge that this phenomenon exists.
Part of the longevity of a user's participation is the willingness of the
community to accept it.

~~~
asperous
You're not given the ability to downvote without reaching a certain karma
threshold, so there are already some thoughts in place there.

~~~
yawgmoth
It actually seems worse to me that people who have been around to achieve that
threshold (it's 500, right?) don't have exhibit the etiquette I'm asking for.
They should know better, right?

~~~
Schwolop
I'm going to respectfully disagree. Part of why I like HN is that meta-
discussion of the "why did you downvote me?" and "downvoting because ..." are
actively discouraged. Better to silently downvote and move on, which I do
frequently for all many of reasons. This has next to no impact unless multiple
readers do the same thing, at which point greying out comments serves the
intended purpose of conveying that the community as a whole doesn't think the
comment is valuable.

~~~
nickpsecurity
"serves the intended purpose of conveying that the community as a whole
doesn't think the comment is valuable."

No, it says that more people downvoted it than upvoted it by a certain number
of votes. Says nothing about the community as a whole which may have never
seen the comment due to the downvotes.

------
derrickc
I'd love to know the 50 companies with >$100mm valuations. Anyone know of a
list or can start one? I saw this was 32 companies last year and really
curious which were added.

~~~
bluekite2000
where is the list of 32 companies?

------
bdrool
Aside from a throwaway line about a possible "macroeconomic meltdown", there
seems to be little attention paid to big signs of an overall negative trend in
tech jobs:

* "Bay Area: Tech job growth has rapidly decelerated" (from here: [http://www.siliconvalley.com/2017/02/10/tech-job-growth-slow...](http://www.siliconvalley.com/2017/02/10/tech-job-growth-slows-in-bay-area/))

* "Tech Jobs Took a Big Hit Last Year" (from here: [http://fortune.com/2017/02/16/tech-jobs-layoffs-microsoft-in...](http://fortune.com/2017/02/16/tech-jobs-layoffs-microsoft-intel/))

The first of those two articles has been submitted twice to HN with zero
comments both times. The second has not been submitted at all as far as I can
see.

Is it possible there is a bit of a collective head-in-the-sand phenomenon
going on?

~~~
econner
At the start of 2016 there was some consensus that things were cooling off.
Markets were down, there were fewer seed stage investments and an all but dead
tech IPO market for the first half of the year. Investors started to advise
companies to lower their burn rates [[https://bothsidesofthetable.com/so-what-
is-the-right-level-o...](https://bothsidesofthetable.com/so-what-is-the-right-
level-of-burn-rate-for-a-startup-these-days-f514545e226b#.4dbbx7rxi)].
Arguably the market conditions were driven by the 2015 - 2016 Chinese market
turbulence
[[https://en.wikipedia.org/wiki/2015%E2%80%9316_Chinese_stock_...](https://en.wikipedia.org/wiki/2015%E2%80%9316_Chinese_stock_market_turbulence)],
but who really knows. Growth has picked back up this year and I’d expect job
growth to bounce back.

------
krishna2
@sama : Great write up. Regarding the admission process you had mentioned on
Dalton Caldwell that he took "a process that used to be stressful and deeply
imperfect and improved it by a huge amount."

Can you please elaborate on that?

------
kriro
Hi sama,

I know you wrote that YC Research will likely not expand in the near future.
If you do I think the most interesting topic would be the destruction of the
journal industry and freeing information. At least in my opinion it would make
a lot of sense for YC to try and free as much research as possible which
entrepreneurs could build upon. I can only wonder how many more interesting
startups we'd get if a random hacker in India or Ethiopia had access to the
latest journals on medicine, biology etc. That would take a lot of commitment
and being in active position to some powerful interests. This should be
attacked from a legal, political and technological angle.

------
optimusclimb
> 4) Does this company have a clear and important mission?

> Without this, I usually get bored. More importantly, companies that don’t
> have this usually have a hard time recruiting enough great people to work
> with them, and thus struggle to become very large.

I find this one interesting. When Google started, there were many incumbent
search engines. Their mission was to provide better results than what existed,
i.e. improve on an existing product.

Uber's "mission" was to get privileged people with smart phones and disposable
income a sexy/cool ride home from the bar.

Facebook was a social networking site targeted at college students...what was
it's mission? To allow people to see what that cute person in their Psych
class was up to this weekend?

Snapchat...the clear and important mission to allow for safely sending risqué
pictures?

While I believe Sam's belief that they WANT to work with companies with clear
important missions, that doesn't seem to be a/the deciding factor in becoming
"very large", or attracting great people. If anything, it seems like the
"spaghetti at the wall" approach is what happens - some startups gain
momentum, and then it's the high growth trajectory that attracts a ton of
talent.

~~~
austenallred
Perhaps the issue is you not understanding the companies' missions.

What you're describing is products, which represent a manifestation of one
piece of the mission, and are a building block that helps construct a world in
which the mission is possible.

Google, for example, is (and was) on a mission to do much more than build a
really sweet search engine. Their goal from the beginning has been (though now
refined): "to organize the world's information and make it universally
accessible and useful." That's a little bit easier to get behind, isn't it?

Uber isn't about "getting privileged people with smart phones and disposable
income a sexy/cool ride home from the bar;" its mission statement is, "make
transportation as reliable as running water, everywhere, for everyone."

Facebook? From the beginning Zuck stated his goal was to "Make the world more
open and connected."

Snapchat, according to Spiegel, is about making it easy to "communicate with
the full range of human emotion."

It takes years and insane amounts of effort from large numbers of people to
build even one tiny piece of each of these missions (which makes sense -
they're enormous missions). But working for a very mission-driven company, I
can attest that it's the mission that keeps me going, even when I'm only one
tiny spoke in one of the many products that will contribute a tiny piece to
making the mission eventually more achievable.

It seems you are viewing these products in a very negative light, and in doing
so you're missing the forest for the trees. I would guess that all of the
companies above will be wildly successful, and will have a wide range of
products, all dedicated to achieving their stated mission. Rome wasn't built
in a day.

~~~
mbesto
> (though now refined)

That's exactly the point. Google didn't start with that mission, it had to be
refined. And Google, meaning Larry and Sergey working on algo's prior to
actually starting a commercial entity. The parent's point is that many of the
most successful tech investments have come from businesses that are generally
dismissed as toys in their initial phases. YC invests in companies at their
earliest stage, so it seems odd that the mission statement needs to be so well
refined. This invariably means there's a disconnect between what pg has
traditionally said and what sama is dictating now.

> Don't be discouraged if what you produce initially is something other people
> dismiss as a toy. In fact, that's a good sign. That's probably why everyone
> else has been overlooking the idea. The first microcomputers were dismissed
> as toys. And the first planes, and the first cars. At this point, when
> someone comes to us with something that users like but that we could
> envision forum trolls dismissing as a toy, it makes us especially likely to
> invest.

[http://paulgraham.com/organic.html](http://paulgraham.com/organic.html)

Anyway, I think the reason that sama says this is because it is absolutely
essentially for a company to get big, but that doesn't mean they need to have
it right away. Also, let's be fair, determining something that is clear and
important is very subjective.

~~~
hyperpallium
Yes. I'll add that Google's initial goal of a search engine that is actually
helpful (not just algorithmically, but without clutter and without paid-
placement) was _plenty_ inspiring... especially for great developers. And,
being more concrete than their general abstract corporate mission statement,
it was actually more inspiring.

I want to add the mechanism of success-due-to-toy: incumbents dismiss you, not
as incompetent, but as irrelevant to them. You're not stealing their
customers, because you're meeting a different need, and are worse at what
their customers want - further, the incubents couldn't fight you even if they
wanted to, because they can't afford to desert their customers.

Then, over time, you improve til you are good enough for their customers -
while stll meeting those other needs. The exodus begins.

------
danenania
Hey Sam,

Here's a question for you (or other YC folks) on YC recommendations.

Give that I'm planning to apply for the next cycle, would it benefit me to ask
for recommendations from 7 or 8 folks who I've worked with in the past and
have strong relationships with?

It's not totally clear to me whether it would be kosher to ask for those or if
it's something you'd rather that people do spontaneously. I'm also wondering
if 7 or 8 is too many given how little time I know you have to spend on each
applicant. Thanks!

------
mbrock
I think it's a mistake to conceive of Reddit as a place to "waste time."

It's also the new platform for lots of important online communities to discuss
and disseminate information.

~~~
shostack
While I think it was a joke, I'll just say that Reddit has become an important
professional resource for me. I have found a couple high signal-to-noise subs
with senior professionals from my industry. If I have a gnarly problem,
there's a good chance someone there can help me out. This is huge because
there isn't really a Stack Overflow type option for these sorts of problems
generally.

------
gregoire
Is there a reason why this is published on Sam's blog and not on YC's blog?

Oh and a remark on the letter's typography: the double spaces after periods
should be single spaces.

~~~
sama
I had emailed this out to the YC community over the weekend. I got word from a
journalist it was about to leak, and I couldn't get in touch with the person
that runs the YC blog (I don't yet know how to post on the new one, but I'm
sure going to figure it out now). I didn't want to wait, so I just posted it
where I could.

Also I happen to think documents are easier to read with double spaces after
sentences. Surely there is something more important to complain about than
that.

~~~
pen2l
> Surely there is something more important to complain about than that.

[https://plus.google.com/+VicGundotra/posts/gcSStkKxXTw](https://plus.google.com/+VicGundotra/posts/gcSStkKxXTw)

Sam, it's meant with the love of the art. I was going to make the same
complaint. For those of us who work in a particular field, certain things just
stick out and it feels very natural to point that out and make the world
perfect in a way we are confident it can be perfect if some things are changed
(I review grants, I convert double-spaces to single-spaces so much that I can
spot one from a mile away and change it right away... sadly, I don't have
access to change your writings :)).

~~~
gregoire
Exactly, typography is a subject that is very dear to my heart.

And while I agree that it may be a personal preference, there is a side effect
to using double spaces: layout engines consider single spaces the default for
their line breaking algorithm, and sometimes, when using double spacing, new
sentences start at a new line with a space before the first letter which, in
this very case, looks weird and therefore hinders readability.

~~~
sama
I love typography too! I really do. This is my one sin in the field...

------
partisan
I appreciate the letter. The following caught my eye, because I was sure we
had all learned that the ends do not justify the means. Surely the Zenefits
debacle was a lesson in ethics and not one about avoiding getting caught doing
the wrong thing.

> we have to work harder to find people doing a startup for the right reason:
> to bring an idea they’re obsessed with to life, and willing to do something
> unreasonable to see it happen

------
applecore
Minor nitpick: _n^2_ isn't the correct factor to describe hyperscale networks.
It's much slower, probably _n x log n_.

------
shreyas056
So Sama is a 9gagger.

------
jtmarmon
"The percentage of women who apply to YC is roughly the same as the percentage
of women who get funded. The same is true for Black and Latino founders."

I'm guessing what he means to say here is that if x% of the applicant pool is
woman/black/latino, then x% of the accepted pool is woman/black/latino, right?
The way it's phrased it sounds like every woman/black/latino who applies is
accepted

~~~
mildbow
Not to me.

 _percentage_ of women who apply ~= _percentage_ of women who get funded.

~~~
jtmarmon
you're right - after rereading I realize that it's totally equivalent

------
rdtsc
> the fact that one of their "partners" is such an obviously destructive force
> within society.

Can you expand on the "obvious" and "destructive" force? What exactly did
Thiel do that is obviously destructive to our whole society? You mean
Palantir? Wasn't that there for a while?

~~~
dang
We detached this comment from
[https://news.ycombinator.com/item?id=13662204](https://news.ycombinator.com/item?id=13662204)
and marked it off-topic.

