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Startups that launched at Y Combinator S16 Demo Day 1 (techcrunch.com)
155 points by runesoerensen on Aug 23, 2016 | hide | past | web | favorite | 125 comments

Honest question: have the specific funding goals of YC changed to accommodate more pedestrian "lifestyle" businesses? A number of these companies look like they could make viable businesses turning out respectable multi-million-dollar-a-year profits without ever being a target for a billion-dollar acquisition.

(My understanding is that YC specifically targets opportunities that have hundred-million- to billion-dollar potential, so perhaps my underlying assumption is wrong here.)

Does this mean YC is hedging their bets, or are they amenable to funding "low" potential companies now? That would seem to jive with their recent public statements about wanting to expand, since not all viable businesses see huge exits.

Not at all. All of these companies have the potential to be worth billions of dollars or else we would not have funded them. Of course it's not always easy for people reading a short summary on a blog to see that potential, as you can easily verify by reading the comments on early articles about uber or Twitter.

> it's not always easy for people reading a short summary on a blog to see that potential

Very true. Today was the 7th demo day I went to with my fund partners. For each batch, we try to reverse engineer the startup list as much as possible, and we usually figure out 2/3 or 3/4 of the list before demo day. Every single time so far, when I review the list of startups before demo day and check out their websites, I think "meh, seems like this batch is a little weaker." Then I go to demo day, see the full picture on each company, and consistently feel like the current batch is the strongest one yet. It's hard to really understand a company's progress and its potential from its website, or even worse, a one- or two-line elevator pitch.

Maybe they're just getting better at pitching you?

It's possible, but I think it's more that elevator pitches are often the tip of an iceberg. For example, if Uber had been part of YC, its one-line pitch might have been "limo service at the push of a button." That's not super exciting. But then I'd go to demo day, and full pitch would be: "we're starting with limos, and here's a graph of traction and retention for the last two months, and based on these trends we think we can move to using regular cars and undercutting taxis within 6 months." That's much more exciting IMO.

This assumes it was their plan from the beginning. Is that the case or did they later pivot based on new information. If the latter is the case then any company would arguably have billion dollar potential

Side-note: I realize you were using Uber as an example to make a point but actually "Limo Service at the push of a button" sounds pretty awesome on it's own.

I think that's the problem with elevator pitches, they tell you what the company is currently but not where they're headed.

Thank you for your response, Mr. Buchheit. I really appreciate it.

This is the answer I was looking for, one that explains your driving intentions. I'm nothing like a venture capitalist or investor, so I appreciate that I may not have any kind of good read on these companies' potentials.

All the best to each of them and to you.

Not a snark, but why do you address him as Mr. Buchheit and not Paul?

I assume he's just trying to disambiguate, because for some reason the thread got hung up on which Paul is which.

Let's discuss more important things now?

Just to be clear, that's Paul Buchheit (a YC partner), not Paul Graham (YC co-founder).

I know. I've edited my comment to reflect that.

FYI, DanG already detached a similar comment: https://news.ycombinator.com/item?id=12341452

I can't help but notice this article puts a lot of focus on actual revenue and margins of these companies and almost none on user number growth. At least compared to the relative focus of years past.

Is that a choice of the writer, or was it something YC companies were coordinated to focus on?

I'm going to chime in and say it's likely a sign of the times in the funding climate.

And a better pool of candidates. Also easy to start businesses online than it used to be.

Please elaborate on how a sofa delivery company fits that model.

Burrow makes its own sofas (not just delivery.)

Americans spend tens of billions of dollars per year on sofas, more than they spend on mattresses. The market is tremendously big and there seems to be a gap between Ikea and $2k West Elm sofas. That's what Burrow is going after.

So they have taken both the capital costs of manufacture as well as delivery. And they have a product near the grand price point in a market saturated by Target, Amazon, Walmart, IKEA, and who knows who else.

To get a billion dollars of that market, they need to move 1e6 of their sofas--and that's assuming pure profit. How many sofas can they make a day?

The math suggests this is not a growth industry.

I'll take a stab at a positive case.

I've seen several small businesses whose only function is to pick things up from Ikea and deliver. If people are comfortable buying sofas online, it will apply to a range of home furnishing items. Furniture stores have been selling "rooms" for years for this very reason.

Aside from brand and customer relationships, if the delivery infrastructure for furniture is different than other items, that will provide a moat.

But is furniture a high margin business? Ikea's numbers suggest it is with gross margins over 40% in 2011 and 2012.http://www.ikea.com/ms/en_JP/pdf/yearly_summary/ys_welcome_i...

The Unilever Acquisition of DollarDay shave clubbed changed the calculus of a lot of these businesses.

Everyone in this thread is referencing Dollar Shave Club.

Can someone give a good summary of why that company made it to a big exit? What strategic moves did they make that made them succeed where countless others fail? Software doesn't automatically eat the world, after all. Why now? Why these companies? What specifically is the right plan?

Thanks for probably the most interesting business article I have seen on HN in a while!

That said, the market between sofas and razor blades is very different. I don't buy a new sofa every month. Companies don't leverage R&D and advertising the way that Proctor and Gamble did to move sofas.

The Dollar Shave Club Explanation here is optimistic at best.

Happy to share.

At list if we look at IKEA(maybe the closest to compare to P&G) - they do have R&D(every year a new lineup, optimizing manufacturing and supply chain), and at least when they grew they did alot of advertising - and they still do some, but maybe they need less because of their strong brand an that they are considered monopolistic locally in places they reach.

But don't take the Dollar Shave Club literally, the point is more the lack of capability of companies(and their ecosystem) to move ahead, because they are deeply integrated/dependent in the past with it's old assumptions.

But now a lot of the old assumptions might be broken : no local monopolies(and monopolies over large areas are much much harder to create), no limit to product variety, much more customization becomes possible, targeting highly focused niches becomes possible, software may enable AI interior designer service for free, the supply chain looks very different for that, etc.

Maybe that's Burrow's future.

Why Unilever Really Bought Dollar Shave Club


I would guess most people do not mind going to a store to buy a couch. Its a big purchase and how often do you really buy a couch?

I'm no expert though I thought Twitter made no since because of facebook

Burrow could get a billion dollar exit through an acquisition but its hardly going to become a sustainable concern. It's designed to sell, basically, and the idea is no more mysterious than building a furniture company that is digital first, which would be attractive to existing companies because they cannot simple change their processes over night.

It might be helpful if you pointed to specific companies which you see as more "lifestyle" businesses.

As others have pointed out, YC (and VCs in general) have definitely expanded outside of pure software companies and a number of them have done well (see Dollar Shave Club). I think it remains very hard to classify companies as lacking in huge potential from the start—originally, I was very skeptical that DSC would ever be worth a billion.

I suspect that it's still a requirement for YC founders to be interested in aggressive growth. It's still for startups after all—I don't think anyone would get in if they admitted their sole goal was to reach <$1m/yr in profit.

Not that my opinion matters for anything, but I don't want to call out specific companies as having "low" potential. Now is probably uncertain and stressful for each of them, and I wouldn't want to undermine anyone's confidence as some anonymous armchair investor on their big day. (I know one should not be affected by that, but we're all human.)

To your point, I wonder if there is some sort of calculus within YC: Company A has 1% potential of a $10B exit, Company B has 50% potential of $100MM/year ... what do we do? Cold logic says we invest in Company A over Company B (not that this is zero-sum), but they can only make so many investments and the real numbers are much smaller than one-percent. Whereas, a series of conservative investments keeps them solvent long-term, while the bigger exits slow boil.

Fair enough, but I think by definition if a company's founders are targeting high/huge potential then it's not a lifestyle business.

> To your point, I wonder if there is some sort of calculus within YC: Company A has 1% potential of a $10B exit, Company B has 50% potential of $100MM/year ... what do we do?

These days, I think the answer is increasingly: both. YC is in the enviable position of fantastic deal flow and also being able to scale up their operation (classes have been getting much bigger).

Of course, they definitely still are going to miss out on some great companies. But I suspect those cases are increasingly ones of YC not recognizing the potential, not cases of passing on companies with only $100MM/year potential.

I suspect that they all have a vision for being a billion dollar company, although that may not be the "phase 1" we're seeing here.

For example, Burrow just sells a single couch right now. It's apparently a really nice couch with a great buying experience, but it's just a couch. Probably not a billion-dollar business.

If I had to guess, though, they pitched a much large vision to YC. They probably talked about a whole suite of barely-luxury furniture. They want to take over the market for 20-30 somethings who have outgrown Ikea but don't want to go through the relatively crappy experience of normal furniture buying. That could be a billion-dollar business.

While they may have a larger vision than couches, the market in the US for couches is larger than that for mattresses (i.e. Casper.)

The market potential is there to build a billion dollar business selling couches, as crazy as that sounds.

You're right on about the market they are going after: those who have graduated from Ikea but don't want to pay West Elm $2k for a couch.

Sleepy's (a dominant retailer in the US for mattresses) recently got acquired for 3.8 Billion.


What you see in a 2 line press article is literally the simplest way to describe what their business is doing right now. The point of demo day is to get people interested in your idea for follow-ups. Read: http://paulgraham.com/investors.html

There's a question on the app that asks (I'm paraphrasing) "what do you know about your market that others don't?". Answer: What appears to be a lifestyle sized market to the casual onlooker is actually big business

> businesses turning out respectable multi-million-dollar-a-year profits without ever being a target for a billion-dollar acquisition.

Very hard at the seed stage to tell the difference between a business that will turn out to be a $3M a year business and one that will be a $80M a year business growing at %30 a year. That latter might easily sell for over $1B. ( After all $80M in profit is only a 13X multiple to reach $1B, and growing at %30/year means that's a cheap.)

I hate the term "lifestyle business", it comes from redefining "startup" to be a very specific narrowly defined form of startup of the kind that is popular in silicon valley in the past decade.

Do note that a small subset of "pedestrian"/"lifestyle" businesses are ripe for acquisitions by large conglomerates. Example? Dollar Shave Club [0] who rapidly built a massive brand despite acting as an upseller/reseller.

[0] http://www.bloomberg.com/news/articles/2016-07-20/why-unilev...

When the narrative of "the next big thing will look initially like a toy"[0] is the investment thesis, then you're probably going to get a lot of companies that look like toys.

[0] - https://gigaom.com/2014/08/07/making-fun-of-silicon-valley-i...

YC's goals haven't changed. The conventional wisdom on what startups make sense to fund is changing though - the whole "software is eating the world" logic suggests that many traditionally non-software businesses are ripe for disruption as well. Think Dollar Shave Club.

That's not quite my question. I'm not referring to the divide between "pure software" businesses and, well, everything else. I'm referring to the divide between $10MM/year gross profit and $1B exit.

Dollar Shave Club had a $1B exit. Is YC willing to fund the former?

It's not just that they're "non-software" business. They're not really even technology businesses, in the traditional Silicon Valley (HP, Intel, Apple, Atari, Synopsys, Netscape, Google, Facebook, Snapchat) sense. Both DSC and Casper are innovative companies, but (as far as I can tell) they don't innovate in technology, they instead use technology to leverage innovation in other areas.

Casper could have been founded 30 years ago. But would NEA and Norwest have invested in 1986 in a version of Casper that used late-night TV ads and a 1-800 number? My guess is probably not. So what does it mean that they do now? Does this mean that the current fashion in VC is shifting away from technology innovation? If so, does this mean that pure technology ventures may soon find it hard to find funding?

Instead of going after a big market directly, they seem to taking on smaller markets intentionally. But, this does not mean that's their end goal.

Tesla also started with high end cars even though the master plan was much ambitious.

Really dig Go Go Grandparent. About a month ago my 93 year old Grandpa was hospitalized for pneumonia. His license was taken for 30 days (either by his doctor's recommendation, or by mandate, I'm not sure) so he was house bound.

My Grandpa's daily routine starts by getting out of the house. After a couple weeks being stuck in the house it was really starting to get to him.

He doesn't really like asking people for favors, so, he resorted to calling up the local cab company and having the cab take him to the bank, grocery store, and his 2nd bank.

Feels like Go Go Grandparent could exist for many other things besides rides, like placing an order for groceries or submitting a prescription.

+1, it's the most interesting of the lot. On the other hand, it seems to assume proficiency with those automated voice menus, which my grandparents can't use either. I wonder if "fully human" system would be profitable.

Idea: a marketing/e-commerce company that takes existing unbranded consumer products, invents generic startup names for them (Noun & Noun), and resells each on its own simple, well-designed site with hipster aesthetic. Piggyback on Amazon fulfillment. Get better margin by reusing the same tech and overhead on each site. Employ low-paid "founders" who can tell a good story but don't have any particular business skill to create some marketing material to try to build buzz for "their" startup. The 2016 version of the dropshipping hustle.

It seems startups are coming to consumer goods. It's likely that dollar shaving club's success initiated a new trend. All that knowledge from previous startups about lean development, marketing, growth hacking etc will be passed together with contacts and influential backers. Even here we see Tampons! (which I though is ridiculous first). Interesting how it will pan out. PG and similar companies should be at least a little bit worried.

> Those tiny seat-back screens cost airlines a fortune because of installation and the weight they add, and they make you feel trapped on the plane. Skylights has developed its own VR headsets and software so passenger can strap in and watch 2D and 3D movies on a giant virtual screen

How is a headset less heavy than a screen on a seat? On top of that, good luck for the hostess when trying to serve you a drink or dinner and you are fully absorbed somewhere else.

Building in an interrupt "Hey, pay attention to the real world now" feature would seem important. On the other hand, it'd still be awkward when you had to climb over someone to go to the toilet or something.

I'd be interested to try inflight VR. It could be really good, or it could just be a one-way ticket to airsickness.

What I'd really love would be a feature that lets me see the scenery currently around me, as if I were flying in the air without the plane. You could just use Google Maps data at first, but if someday they installed a few cameras on the exterior...

> What I'd really love would be a feature that lets me see the scenery currently around me, as if I were flying in the air without the plane. You could just use Google Maps data at first, but if someday they installed a few cameras on the exterior...

Wouldn't that make you sick by itself though ? :)

Strange, almost no data-economy (collecting and selling user's data - the way "social" is monetized) or data-science startups.

A thin layer of encryption over cloud storages is a clever idea! And this is exactly how tech entrepreneurship should be - even if the project would fail due to non-technical reasons, the technology being developed could be reused and sold.

"Lifestyle startup" meme is crap.

> Today’s startups were focused on consumer, developer tools, security, hardware, marketplaces, and non-profit. We’ll see a different set tomorrow concentrated around enterprise, B2B, biotech, edtech, and fintech

From the article

I was also surprised. Almost no "machine learning" or "AI" startups. Maybe they are trying to regroup startups sector in theme, so maybe tomorrow?

If I was to invest in any of these it would be


I have often thought about this myself. There are som really interesting problems to tackle (like drone clustering and continued surveillance and tracking of intruders using a series of drones (as they run out of energy)

Their challenge is going to be legislative more than anything else but things are working in their direction.

Agreed, I too had this same idea! So many security guards are paid to patrol parking lots. This could be cheaper and way more effective.

Security guards are paid to patrol parking lots because experience has shown that the presence of human security guards patrolling the parking lots reduces crime, even compared to comprehensive and visible remote monitoring with obvious (and advertised) cameras.

I'm not sure putting the cameras on drones changes the psychology that leads to this effect.

On top of that, I wonder if its effectiveness will be impacted by the fact that destroying a drone and attacking/killing a human have different, legal consequences. Crooks sabotage equipment a lot more than they attack people. Quite a few ways to shoot down or disrupt drones appearing online. Might go from hearing how crooks spraypainted cameras to how they paintballed the slow-moving, predictable drone.

Sure but there are many other situations for instance first responder which allow for best allocation of human guards by being able to better monitor where they should be.

Oh, sure, and I don't mean to imply that security drones don't have plausible value in some circumstances, I was just addressing the one specific and significant aspect of the "security guards paid to patrol parking lots" scenario...

What they need is a bad-ass looking ground robot

Could even be used as first responder to even figure out if you needed to send someone. With infared and camera it would be very easy.

Sixa, has an intriguing pitch:"your powerful computer on the cloud , fit for virtual reality , with just 10ms latency".

Does anybody knows how does it work ? And is there a free 10ms in the VR latency budget ?

I'm not sure but I did like one of their features: ensuring your proof-of-concept will work for your client evaluating it as well as it does for you via same box. Previously, I'd have recommended virtualization or simply mailing them a demo appliance if profits justify it. The virtualization software usually is a heavy install requiring admins that digs all into the system. The second option costs a box per evaluator plus they have to put it together on their end. There's also containers these days as evolution of virtualization approach that similarly require configuration and training.

I think a simple solution for two people using the same desktop and configuration with low-latency is a powerful alternative. I could see all kinds of users wanting that combo of convenience and effectiveness for $0.45/hr [assuming no hidden fees]. Potential for lots of growth.

Simbi (the bartering marketplace) looks interesting. Wouldn't it be functionally equivalent to building something that allows people to trade their skill for money directly?

Also, does the user on Simbi pay ... taxes right now? It would be interesting if they don't and Simbi becomes big, cause IRS is really the one government agency you won't ever fight and win.

I had the exact same idea which I just sat around on...more along the lines of open requests ("I will do X in exchange for Y")

Oh well, good for them - they executed

It looks a lot like LETS [1], those non-profit through which you can exchange services with other members. There is often a social aspect in these systems and the exchange rate is more related to efforts than to the economical value.

1 : https://en.wikipedia.org/wiki/Local_exchange_trading_system

My wife ran a Time-based currency market in Madrid 6 years ago, it even got the attention of the press.

It's a slightly different model from LETS since time is the currency and different tasks are, therefore, all valued the same. I was the one to install and maintain the software behind it (called Cyclos, project.cyclos.org).

I'm glad someone can turn that into a business, people really love to get help from others and/or offer their own services. Although my feeling is that there's considerable churn in both supply and demand.

Turning it into a profitable business could increase this type of market by investing in the software infrastructure and promoting this type of trade.

But I wonder how they plan to extract a part of the value that is traded on this market. It's not really possible to take fees.

Cool. Really looking forward to that calorie counting thing. If that works and can be hooked up to beeminder and corporate welfare programs, that could potentially be a game changer in terms of obesity.

Thanks for the implicit Beeminder plug! And funny Freudian slip there with "corporate welfare" instead of "corporate wellness". :)


Does anyone know definitively but doesn't react native have issues with performance on android ?

React Native on Android has gotten way better over the last year. In general, Android phones just have worse performance than iPhones (even when they have better specs -- I'm not totally sure why) regardless of whether you're dealing with React Native or not.

Sometimes you might have to spend some time wrangling your code to get the performance results you want, but that's usually the case in building software.

Check out https://play.google.com/store/apps/details?id=st.li.listapp . It is built with Exponent/React Native and has pretty great performance. Got featured in the Play Store.

was the ios app for list created with exponent also ?

The iOS app was made with UIKit. Exponent could be a good fit for companies in similar positions who have just an app for just one platform (more often iOS) and want to build an Android version but find it hard to hire that talent.

> JustRide – Getaround for India

Just curious, is that image of a bridge in India?

That's actually from the Bay Bridge heading into San Francisco — tower on the right is 1 Rincon (there's already a few more next to it going up now). Curious if this was a case of "just throw up something that looks halfway decent" or if they're intentionally trying to appeal with the US car culture?

Of course not, the cars & their license plates also give it away.

"Flex – The modern tampon"

You mean menstrual cups, that are worth like 20 bucks and you can keep for more than a year ?

It's tough to give an in-depth description of a product with a short blurb. It sounds like Flex is significantly different from a traditional menstrual cup:


From the interview:

> ...they don’t like the fact that you have to rinse and reuse a menstrual cup. Plus, they’re difficult to insert and remove.

I guess that's how Flex is different from a menstrual cup. Not being a woman, I can't say how important those things are. I'd guess that they're not worth the extra $20/month, but maybe they are.

Exponent - ROR for React Native sounds really interesting - anyone using it ?

startup era of 2009-2014 is long over.

What do you mean?

Startups thrived then because mobile technology was just getting big and bigger tech companies were largely late to the party (including FB, GOOG) giving startups a chance to hit it big (IG, SC, Messaging apps, etc.). Now these giants are innovating as fast if not faster than most small startups and the small guy barely stands a chance.

I can't think of a startup that started in the last 3 years that has really "made it." Snapchat is 5 years old, Lyft 4, Uber 6, Airbnb 7+, Reddit 10+.

You can't think of a startup started in the last 3 years that has really "made it" because it takes years for a startup to "really make it"!

If you disagree, please find the 5 year old hn thread where people say that snapchat is the next big thing.

Slack comes to mind, i think it was released in 2013.

Or maybe it takes 3-5 years to "make it".

Giphy clearly comes to mind as something recently created that is in the consumer tech/data market which is going to become a behemoth at its rate of growth.

As Paul said it takes longer than that to make it, but Twitch TV sold for almost 1B less than 5 years after launch, and just turned 5 in June.

Twitch is Justin.tv. It launched in 2007 (iirc), and pivoted to games in 2012. The company changed its name a few years after that.

Cruise Automation -- Founded 2013 (three years ago), sold for 1B this year.

That was a crazy anomaly. It's hardly even a startup. Some guys with some tech - and a 'maybe gullible maybe paranoid' M&A guy at a massive car company dolled out money. It's almost an IP play more than anything. It's an M&A transaction, not really a startup.

This post is factually wrong. GM acquired a ready to go R&D lab and leapfrogged everyone else in the process. The rest of the automotive industry is now playing catchup.

I beg to differ.

I've worked closely with M&A teams for Fortune 50 and watched these kinds of acquisitions time and time again, and more often than not - they go sour.

To your own point - yes, GM was probably panicking that they were 'behind' in self-driving cars, and needed to pay to 'catch up', however, we'll have to wait to see how well they are able to integrate this tiny technology team which had very few actual customers into the GM empire on an operational basis.

Given the scope and scale of GM and the auto-industry, and that 'self driving cars' are 100% going to happen ... if GM is able to make the IP work in any reasonable way, it will likely be a worthwhile investment.

As to 'leap-frogging' - given that BMW, Mercedes and so many others already have self-driving cars in the field, I'm not so sure that is a fair characterization.

That said, the track record of large companies buying their way into markets by picking up small, unestablished technology companies is not good.

That's how it felt at the beginning of 2011. AirBnB had yet to get big, Uber and Instagram had launched 2 months before and barely anyone had heard of them, SnapChat was 9 months in the future, Parse's founders had yet to meet and pivot into the idea, Whatsapp was growing but almost nobody in the US knew about them, Instacart and Slack were still in the future. The only hot startups was DropBox and Heroku, both founded in 2007. Reddit was 6 years old and already old news; Twitter was 5 and beginning its downward slide. Facebook was the new kid on the block, and Google was kicking butt.

It's amazing what a couple acquisitions and hot product offerings can do.

a lot of Startups year 3 is the inflection point.

Wow, so many "lifestyle" BS.

I see DSC every on this thread, looks like the acquisition of Dollar Shave Club is going to do to the Consumer packaged goods (CPG) the same Netscape IPO did to internet companies.

How many startups presented off-the-record?

None...I thought. Right? Do they do that?

Yes, they have definitely done that in past demo days (meaning, reporters at Demo Day can't write about these startups).

Interesting I never knew they did that. Now I'm curious what compan(ies) they've done that with, why and if they are still in a "stealth" mode.

What I heard is that often the startup feels it isn't ready to launch yet, so it wants to wait before doing a press blitz.

Every idea you have will be done by a better prepared YC startup, eventually. Makes me sad...

Your sadness is based on incomplete information. Many YC companies flame out every year far all sorts of reasons, even with all the advantages that come from participating in the program. If you want to make your thing work badly enough you can make it work, competition or no.

Right. There are still more "successful" companies that are _not_ YC than those that are. While there are some advantages to YC, there are advantages to other incubators, or other angels, or completely bootstrapping, etc.

Go on being that better prepared YC startup then.

I was delighted to discover one of the startups is doing what I'm about to be doing. So they are ahead of me and they have gone thru YC. So they are primed for success, while I'm still busting my butt to get to the point where I can apply to the next round of accelerators.

But they have taken what I consider to be the wrong approach, and seem to be missing a tidal wave of disruption. They are aiming for a where the puck is going to be in a year, not where it's going to be in 5 years (the first one is a lot easier than the second)

Plus going thru YC and getting on that SV ... path ... has its own costs and risks. Taking VC starts a clock and limits your options and in some ways, opportunity, to what the VC can see. For example how much revenue you have in a year has a huge impact with whether you can raise revenue a year from now. If you really have a better view of the market and future and technology than VCs and Accelerator Mentors (and you should, after all, because you're an expert in this area- and if you aren't you will be in 6 months) those limitations are not to your advantage.

In my experience in an accelerator so many of the companies were still trying to figure things out. They didn't know things well enough to confidently know the difference between the good and bad advice they were getting from the mentors. (mentors even giving good advice can be wrong, simply because their expertise isn't what you're doing-- if it were, the market you're attacking would already be taken.)

In the case of the competitor to what I'm starting, I can see how they have made some bad choices already (just from the TechCrunch article, haven't even clicked thru to their site) because they are already practicing the cargo cult dance, building paper maché airplanes hoping for VC money to rain down from the sky. That's fine, they may win that way, but I still like my chances.

If you read these articles every demo day and watch the YC and TechStars startups, eventually you get to where you can tell which ones have something and which ones don't (though of course there are some outliers.)

None of these companies have it made, so don't lose heart.

Can you share which startup that is?

Or, maybe clarify what "practicing the cargo cult dance and building paper mache airplanes" means?

YC startups are not the 'end all'. It's a special program, but it's not that special. Go and build your thing and make it good.

FYI, Venning, I don't believe parent is PG. It's a different Paul. PG's user account is https://news.ycombinator.com/user?id=pg

I know you were being helpful but it's probably best if we detach this from https://news.ycombinator.com/item?id=12341440 and mark it off-topic.

I know: https://techcrunch.com/2016/01/08/y-c-switches-up-its-manage...

Edit: I didn't provide much context. He is Paul Buchheit, a (the?) managing partner at YC Core.

Yep Paul Buchheit runs YC Core. Here's a more in-depth article about the "new" structure: http://www.businessinsider.com/sam-altman-paul-buchheit-ali-...

I also enjoyed reading this interview: http://www.bizjournals.com/sanjose/blog/techflash/2016/03/y-...


FWIW pg often spoke of his desire to scale YC and benefit more startups. As I understand it that's one of Sam Altman's primary goals.

This echoes 500 Startups thesis.

>benefit more startups

I call it buying more lottery tickets and it's not a sound investment strategy.

If my lottery tickets had anything like the rate of return of YC's, then buying more would be an extremely sound investment strategy.

For whom? YC or the people applying to YC?

I don't even work at YC anymore but care about it deeply. The deal is actually a good one because it's not like getting money from someplace where you get some advice once in awhile and that's it. It's a huge community that helps each other, and that makes it work. You learn things from people that nobody would ever share on a forum or conference or put in a blog post, and it's that secret knowledge that helps startups go from zero to one.

I wouldn't be here without that community, and a lot of successful founders feel the same way.

"I call it buying more lottery tickets and it's not a sound investment strategy."

It is definitely a 'lottery ticket' strategy and it is definitely worth expanding.

If YC can establish itself as 'the place you do seed funding' in America, and can get kind of a monopoly on deal-flow ... then they should invest in anything and everything that even makes sense.

I'd argue the program is too big now to offer any really special value on an individual basis, it's a 'filter' with 'access'.

Like getting into Harvard is maybe more important than anything you actually do there. The H-bomb is what opens doors, just like the YC-bomb.

I personally think that YC companies are on average decent, but most of them are not particularly interesting. Nor do I buy that most of them could reach a $100M+ market.

That said, most of the 'successes' will be acquisitions by big companies paying often massive multiples for future earnings and 'strategic value' and the projects will go nowhere once absorbed.

You seem to be ignoring the simple fact that YC has invested in startups now worth over $80B in market value and the closest comparable is more than 10X less.

You're right that most have difficulty getting to $100M but frankly that is most of them. That's how the power law works. Investors who don't make money in VC spend all their time trying to avoid making mistakes. The best investors make sure they don't miss the billion dollar startups.

Your last statement is factually incorrect as well. Most of the YC portfolio value is from large standalone businesses on track for IPO. There are exits that are large and notable through acquisition but if you read PG's writings and talk to YC partners, acquisition is never encouraged. At other places that's the only chance they stand at returning their funds even 2X. Harsh but true.

I'm definitely not ignoring the fact that YC has invested in startups 'worth $80B'.

However - my last statement is correct.

Most YC businesses will NOT IPO, not even close. Most of the 'success stories' from YC will come from acquisitions, you can hardly deny this.

Sure - most of the valuation may derive from YC businesses that (eventually) do an IPO, but they are very small in number, so I think it would be disingenuous to use an $80B valuation, which is derived from a tiny number of companies (mostly one: AirBnB) - to describe 'successful YC companies'.

Also, to be fair, as far as I am aware, in the entire history of YC, none of their companies have done an IPO. So, there's that.

Sure - most of the valuation may derive from YC businesses that (eventually) do an IPO, but they are very small in number, so I think it would be disingenuous to use an $80B valuation, which is derived from a tiny number of companies (mostly one: AirBnB) - to describe 'successful YC companies'.

..isn't that the whole point of venture capital? Investing in a bunch of companies with high risk but high potential of return and having a tiny number of successes pay for the losses?

A bit of a stretch to make claims like "growing 13% per week!" and "20% margins!" on tiny businesses.

You misunderstand. Most folks don't even do that. If you can't grow from small numbers then it will be impossible to grow at large numbers. These stats are table stakes.

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