
Y Combinator’s Paul Graham: We’re Looking For People Like Us - cwan
http://techcrunch.com/2011/05/24/y-combinators-paul-graham-were-looking-for-people-like-us/
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kemiller
This is probably the single most discouraging thing I've ever read about
startups, but at least it's honest. Entitlement? "Naughtiness"? I think after
Google, the idea got out there that it's possible to succeed by just being
_good_. Technically and morally. This sounds like a return to status quo. Not
saying he's wrong. He's almost certainly right, it's just depressing.

~~~
paul
Following all the rules does not make you a good person. In fact, rule
following and obedience to authority is what enables large scale evil. See
<http://en.wikipedia.org/wiki/Milgram_experiment> for a famous demonstration.

~~~
amackera
Conversely, breaking all the rules almost always makes you a bad person.

~~~
nostrademons
Nobody can ever break _all_ the rules - the laws of physics might have
something to say about it.

If you limit your statement to "all the rules of the society in which you
live", I'm not sure your statement is true. What do you think of Oskar
Schindler? Womanizer, cheat, Nazi, fraud, and traitor. Yet he saved the lives
of hundreds of Jews during the holocaust, and ended up as the hero of a movie.

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jonathanberger
It's interesting to see pg's opinion about what is important in founders
evolve over the years. When I applied to YC in late 2008, I was told by alumni
that YC was "looking for smart people." Although he's talked about discipline
and determination as early as May 2004 in his essays those words were most
commonly found next to the words "talent," "skill," or "smart," as if the two
qualities were equally important.

Now it seems that YC has learned empirically that determination is the more
important predictor of success (see intro to The Anatomy of Determination).

A concern for YC might be: with this new emphasis on determination, it might
become the next thing applicants try to "fake" to get accepted?

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RyanMcGreal
Maybe they've figured out that there are plenty of smart people, but not as
many truly determined people. Determination then becomes the limiting factor
once smartness has been established.

~~~
freshfunk
This reminds me of Outliers when Gladwell talks about concert violinists.

"All of the violinists had started playing at around age five, and they all
played about two or three hours a week during the first few years. However,
around the age of eight, an important difference began to emerge in the amount
of hours they each practiced. By age 20, the stars in the group had all
totaled 10,000 hours of practice over the course of their lives; the “good”
students had totaled 8,000 hours; and the future music teachers just over
4,000 hours.

What the research suggested was that once you have enough talent to get into a
top music school, the thing that distinguishes one performer from another is
how hard he or she works."

Being in Silicon Valley, I meet smart entrepreneurs all the time. Many of them
come from places like Stanford. I think many pass the basic threshold of
intelligence. In fact, this is more than passing considering that it doesn't
take an elite education to create a good company IMO.

Obviously, not all these people succeed and so the other factor behind success
is likely to be what you said: determination.

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zachallaun
> "YC has invested a total of around $5 million"

It's incredible to think of the value that has been added to so many companies
for the price of a single large series A.

~~~
patio11
It's amazing how much you can do when you start unbreaking things.

Edit: That was excessively brief. So many parts about the whole investment
cycle were broken. Some are marginally less broken now. Having a negotiation
between a fresh engineering graduate who does not know what "pre-money
valuation" means and the principal of a firm with 9 figures under management,
and expecting that negotiation to produce an equitable or efficient outcome,
is broken. Contacting angels serially is broken. Using who has attended a
dinner party with your buddies as the most efficient screening method
available for predicting skill with conversion rate optimization is broken.
Investment outcomes where the company succeeds and founders do not end up rich
is broken. The work culture in Silicon Valley is _insanely_ broken. etc, etc

YC has unbroken some of these. It turns out that an application process and a
few weeks with a team scalably works as a decently efficient proxy for
success. It turns out founders can be taught what pre-money valuation means
and when they know this they get screwed less often. It turns out that
spending half of one's time raising money is, as expected, just a deadweight
loss.

~~~
lurker19
Your comment made me look at YC as an extended extremely thorough onsite
interview, and it really clicked. But then I remembered that YC companies
pitch demo day to a bunch of relative strangers-to-the-teams, not the YC
investors themselves. Or do Demo Day investors get quality time with the teams
during the season?

Of course YC is overall a mix of interview and internship and summer camp and
summer classes and more. The above is an attempt to think through one of the
threads.

~~~
patio11
The angels get one extraordinarily significant bit about all presenters prior
to the Demo Day presentation: _they were in YC_. That is a very significant
bit relative to another similarly situated twenty-something which a gleam in
their eye and prototype on their MacBook.

It used to be implicit that some angels were saying "If you're good enough to
be in YC, you're good enough to get investment from me." That is now 100%
explicit for at least one deal. The vetting is getting outsourced,
streamlined, and productized.

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revorad
Video: <http://www.ustream.tv/recorded/14928956>

~~~
vegashacker
Thanks. What about the PG "office hours" that was supposed to happen? It
sounded like it'd be really interesting to watch.

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fleitz
"The total value of YC companies is now around $3 billion — YC has invested a
total of around $5 million."

Damn, that's a good return, if you assume all positions were held and an 8%
stake taken then that should yield $240 million, or an ROI (CAGR) of 116%
since 2005. (This assumes the 5 million was all invested in 2005).

Anyone have a good metric to factor dilution from future rounds?

~~~
pg
We assume (probably conservatively) that we'll end up with 2% after dilution.

~~~
pja
Given that you can achieve 12x return on equity within YC, the obvious follow-
on is: can YC itself scale, or does it depend on the few individuals currently
running it for its success?

I know other YC-a-like organisations have started up elsewhere: have any of
them been running long enough to get any idea of long term success yet?

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norswap
Hey, there's a nice photo of the interviewer and interviewee _shoes_ in there
!

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6ren
Dropbox, the startup that most easily came to pg's mind, began with a single
founder, who didn't already have a relationship with his co-founders. It was
also a great idea, well-worked out from the beginning. Not undermining the
five points, just saying that they're more _guidelines_.

It's crucial to look at the founders, because that's what does the work. Just
as Catmull says of movies, a successful startup is made of many creative
ideas; also, many implementation challenges, flexible adaptations and tests of
determination that is very hard for one person to handle.

A startup is an on-going process, not a one-off event.

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yumraj
So at roughly a stake of 6% which YC takes, at a total $3 billion valuation,
YC's stake is worth $180 million, from an investment of just $5 million. Not a
bad payoff, surely to make a lot of Angels and VCs very envious.

~~~
staunch
They have less than 6% of most of the most valued companies. They suffer
dilution when these companies raised money. YC doesn't do follow-on rounds.

Then again the companies will probably be worth even more by the time they
reach liquidity.

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ChuckFrank
I think what Mr. Graham is saying is not only natural, but inspiring. Firstly
success and opportunity generates itself, and the best way to generate that is
to look for patterns. So if people like us are successful, then in looking for
more success, we should look for people like us. Secondly, the fact that
'naughtiness' is one way to look outside of the status quo, doesn't diminish
all the other ways of looking for solutions. Mr. Graham celebrates
'naughtiness', other 'like us' traits could include tenacity, perseverance,
team oriented, data driven, and humility. So this is not about following the
rules versus not following the rules, it's about being able to distinguish
between necessary, even essential rules and problematic rules. Today Mr.
Graham exhorts us to celebrate naughtiness in our quests, tomorrow we can
celebrate mischievousness. There's plenty of time, and plenty of traits to
success.

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niqolas
Consider the stats at the end of the article for a moment.

The total value of YC companies is $3 billion. While, the total amount
invested by YC is $5 million.

Very impressive results when you consider that YC takes about a 6% stake for
its initial investment. Congratulations to all involved.

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6ren
Determination, Flexibility, Imagination, Naughtiness, Friendship

[http://www.forbes.com/forbes/2010/1108/best-small-
companies-...](http://www.forbes.com/forbes/2010/1108/best-small-
companies-10-y-combinator-paul-graham-ask-an-expert_print.html)

~~~
6ren
ndiff

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magellan
Everyone loves to hate on MBA's it seems. Have there been any yc companies
started by mbas?

~~~
nxrfe
yes - there are a few. See Custora and Fivestars Card

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natural219
5 million seems like an incredibly low figure. Just goes to show the power of
smart money.

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citizenkeys
Meh... Y Combinator is a potential source of start-up funding. Just as
important, Y Combinator is not exclusive of any other source of funding. The
difference between YC and other sources of funding is that YC funds a lot of
companies twice a year rather than on an as-needed basis so the whole process
is very eventful.

As YC funds more companies, the value of the "We're a YC company" branding
diminishes faster. Whatsmore, there's some curious economics in how YC
companies do business with other YC companies. If the bulk of customers of YC
companies are other YC companies, then you what you have is basically just a
pyramid scheme. It's also kinda lame to hear Paul Graham play favorites and
talk about how great Sam Altman is all the time.

~~~
fearless
I think you're just being bitter because you got rejected by YC, and now
trying to deal with it by saying "Well, YC's not that great anyway".

With the value of YCs portfolio companies over $3 Billion, it's ridiculous to
make the allegation that YC is some kind of pyramid scheme.

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bhoung
Would love to hear more about things you've learnt about rejecting companies
which later go on to be successful beyond rtm marking harshly.

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clarebear
"we’re not looking for people who did what they were told in life.” seems like
a useful heuristic beyond just start ups.

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JulianMorrison
I like that idea of treating raters as candidate black-box predictors.

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Geekette
PG!!! Socks & sandals? Nooo... ;)

Aside from the visual violation, nobody should hide their digits under socks
in spring/summertime. All feet look good; nothing a good pedicure can't fix.

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askar_yu
is there a video of this interview?

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rubashov
Is the sandals with socks thing some sort of deliberate middle-finger? In NYC
on a stage, no less.

~~~
metra
Birkenstocks with socks is okay: <http://www.gq.com/style/style-
guy/shoes/200309/birkenstocks>

~~~
rubashov
Birkenstocks are never OK.

~~~
btilly
I use my footwear as a test. If you don't like me simply because I'm wearing
comfortable sandals, then I wouldn't have liked you either and I've saved us
both a spot of trouble.

~~~
thomasgerbe
He didn't say he didn't like him. He just doesn't like a facet of his fashion.
I don't like Crocs or Uggs. I don't think people look good while wearing them.
But that doesn't mean I don't like them.

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MenaMena123
I like the video every time Paul Graham says "I dont know" "I dont know".
Seems like a good guy. He's a kid himself, I like it.

