
Y Combinator, Backer of Dropbox, Vaults from Experiment to Kingmaker - dopeboy
https://www.wsj.com/articles/y-combinator-backer-of-dropbox-vaults-from-experiment-to-kingmaker-1521718200
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joeblau
1280 Companies[1] — 1 IPO

Kingmakers... hardly. I remember going to a Commonwealth Club talk in January
of 2013 titled: "Y Combinator:The Secret in this Incubator's Sauce". They
talked about how YC exits are on par with or worse than any person trying to
start a company. Sure there is tons of support when you're in the program and
they really try to ensure soft landings through their relationships, but it's
hardly a machine where your entrance into YC guarantees you a billion dollar
valuation and great IPO.

Saying that, I still think YC is a wonderful program. It's what business
school should be — starting and running a company; not talking about it. They
have amazing leadership, mentorship, relationships and community in place
which remove huge barriers from starting a company. I advise everyone I know
who has a company idea to apply every semester.

[1] - [http://yclist.com](http://yclist.com)

~~~
austenallred
YC companies are collectively worth over $80 billion. They’ve invested in
about 1500.

Considering they’re almost always first money in, those are not even in the
same zip code as normal returns. Those numbers are absolutely astounding.

~~~
majani
The 'worth' of a private investor's portfolio is a vanity metric. A more
precise measure of YC's success would be money invested VS realized returns.
Are those figures available?

~~~
austenallred
It’s not really a vanity metric in this day and age. A lot of the best
companies aren’t going public... ever. The measure that determines whether
it’s a vanity metric or not is liquidity. If there are a dozen investors
willing to buy stock at $x it’s worth $x.

~~~
dsacco
_> If there are a dozen investors willing to buy stock at $x it’s worth $x._

This is not a correct representation of liquidity, and thinking about it under
this definition can be very dangerous. You need to consider:

1\. How many shares are there outstanding?

2\. What is the ask price of those shares on paper?

3\. What is the bid price of those shares by investors willing to purchase
them on the private market?

4\. How many owners are allowed to sell their shares at the same time?

5\. How many owners could realistically find a buyer _at the paper ask price_
of the shares?

6\. How many owners could sell their shares before the existing deviation
(spread) between the paper ask price and available bid prices changed?

This is not to say your overall point is wrong, it's to say that it can't be
defended this way; more importantly, we really shouldn't be simplifying our
discussion and its definition of liquidity to the one you've presented here,
which is too simplistic. There is a lot of nuance about price discovery
between public and private valuation that's missing here. For (one) example,
you can maintain an artificially inflated valuation of a private company if
there are fewer owners willing/able to sell than there are buyers, despite a
relatively larger set of potential owners either not allowed to, or not
conveniently capable of, selling their shares. This scenario makes presents an
asymmetry between the weighting and availability of positive vs negative price
sentiment that is much more easily resolved in the public market.

~~~
austenallred
Of course there’s a lot of nuance there. But certainly we can all agree on two
things:

1\. YC has not had good returns because it has only had one IPO (apparently
selling Twitch and Cruise for $1B each don’t count as a win?)

2\. While it’s difficult to know what the true value of YC companies is, the
fact that there are nearly 100 companies valued at $100m+ is not just a
“vanity metric.” Especially st the later stages of more mature companies there
are real dollars trading hands and there’s more liquidity available on
secondary markets.

~~~
dsacco
Sure, I agree with those two points.

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mankash666
YC today is becoming the same as brand-name universities have. Their hype
cycle as kingmaker now attracts 7000 applications for 141 slots. If you pick
the best and the brightest, your value add is debatable.

Just like Ivy league schools - regardless of how good their program is, by
virtue of picking the best, they have de-risked their brand dilution
considerably. Mark Z didn't need Harvard or a degree to become a billionaire.
If all the knowledge of YC gets democratized, anyone from anywhere can thrive
at a business without going through YC

~~~
shafyy
To be fair, they do share a lot of their knowledge openly. Just check out
their YouTube Channel and blog. There are no secrets or tricks.

But I guess YC is more than knowledge. It has a strong signal effect, and the
regular OH sessions you get with the partners potentially can help you a lot
(even though you already might know what they telling you, but like a fitness
coach, it helps you stay on track). Plus the alumni network, which I guess is
especially valuable for B2B businesses and future partnerships.

I didn't go through YC but know some people that have and I think that what it
breaks down to.

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HHalvi
I don't know if it's a popular opinion to hold but YC has always been a
kingmaker from the start. Only when Dropbox filed an IPO and is now worth a
bazzilion dollars in the public market most of the media has caught up to
their work. To the entire team at YC keep going there are phenomenal startups
to come :)

~~~
ellisv
In my opinion YC had some good wins early on but now, especially as the
cohorts have gotten much larger, it’s not clear if they’re still “kingmakers”.
It would be more impressive if their cohorts were still very small and had a
high success rate (however you measure success).

~~~
ENadyr
The key factor here is the time it takes for a startup to be "successful", it
took 9-11 years for Dropbox, Airbnb, Stripe to get to where they are today
after they went through YC. It will take a similar amount of time to see how
successful the larger batches are. I'm guessing your concern is whether they
manage to give the same attention to each of the startups as the intake size
increases. PG talks about doing things that don't scale
([http://paulgraham.com/ds.html](http://paulgraham.com/ds.html)), so I'm
guessing YC is trying to experiment with scaling, and it will be at least a
few years to see definitive results.

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jey
Via outline.com: [https://outline.com/VY5L3z](https://outline.com/VY5L3z)

~~~
koolba
While I love the utility of it, how the hell is that website legal? It’s
stated purpose is to violate copyright law?!

From the page trailer:

> Outline is a free service that makes websites more readable. We remove the
> clutter, like ads, related links, and comments—so you can read comfortably.

~~~
fsniper
It's not the only service that does this. Even browsers have out of the box
support for some of them.

~~~
nothrabannosir
Browsers don’t redistribute the content. That’s a crucial difference, much
like you can video tape a broadcast and fast forward through the ads at home,
but not if you run a pub.

~~~
crx087
I haven't looked at the code, but maybe this site doesn't redistribute
anything, either.

And just because something's executing on the server side, that really
shouldn't _necessarily_ change the legality of it. (Hell, maybe Safari or
Chrome look like they're doing it locally and tunnel data through a cache
server.)

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Mononokay
Even the first batch of YC was fairly successful - reddit made three
millionaires, and Loopt made two or three.

~~~
fjsolwmv
"millionaire" is hardly successful _for YC_ , any of those people and more
would have been millionaires if they joined an established big company.
$10millionaires would be interesting credit for YC (and maybe some of them
are). And Reddit's impact on society as a top 10 consumer website is
undeniable regardless of financials.

~~~
whataretensors
Especially since you have to be close to a millionaire already to invest in
anything.

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rokhayakebe
Makes sense: Mastermind group. I would like to see a decentralized YC trial,
i.e. a group of 10 startups/entrepreneurs, who are at a similar level, come
together in a form of support group/alliance: monthly meetings, weekly email
newsletters, one-to-one support & communication across several disciplines,
etc... I want to track their performance and outcome after 1, 2, 3 years and
compare with other existing models.

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simonebrunozzi
Does anybody know if the terms they offer to startups are negotiable / have
been negotiated before? I believe that it's currently $120k for 7% of the
company, with pro rata rights. (it roughly equates to investing $120k at a
1.7M cap).

~~~
tim333
I think I heard it said there has been the odd exception but the vast majority
are that deal.

Update: "While we may deviate from this in exceptional cases, it will still be
the case for almost all of the companies we fund."
[https://blog.ycombinator.com/the-new-deal/](https://blog.ycombinator.com/the-
new-deal/)

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enitihas
"Y Combinator CEO Michael Seibel." \- It says below the image. Isn't he the
CEO of the accelerator program and not whole of YC?

~~~
sytse
Correct. But I think the main program is called Y Combinator and the whole is
called YC Group, Sam Altman is the CEO of that.

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aphextron
Is there a non paywalled link?

~~~
eat_veggies
Facebook redirect trick works as usual

[http://facebook.com/l.php?u=https://www.wsj.com/articles/y-c...](http://facebook.com/l.php?u=https://www.wsj.com/articles/y-combinator-
backer-of-dropbox-vaults-from-experiment-to-kingmaker-1521718200)

~~~
Redoubts
Hah, never heard of the Facebook trick before. Thanks.

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dopeboy
Hey guys, this wasn't supposed to be on the front page. We (Manish, Zach,
Kaya, and Lucas) are at the YC hackathon taking place right now. We're
building an app that is like MoviePass for different publications. I posted
this link here because FB, Google, etc bypass WSJ paywalls but HN doesn't
(which we need for our demo).

~~~
drharby
"Oops"

That is really funny. Real life writes better material for Silicon Valley.

~~~
winfred
Ssssssttt.

Don't wake the children yet.

