I hear this almost as much as the "90% of startups fail" piece of wisdom, and I was a little surprised to see it in a PG essay. I'm not saying it's necessarily wrong, just that I don't totally understand it.
Risk is "the possibility of suffering harm or loss; danger." So what's risky about a startup? If you are paying for it yourself, maxing out credit cards, etc, then the startup is indeed likely to be harmful to you.
But, if you get YC funding, and are the under 30 crowd that PG refers to with low living expenses, then it's pretty unlikely that you're taking that approach. Instead, you're simply not saving any money for awhile. So there is opportunity cost lost, since surely most of the YC founders could make a nice chunk of change working for the man. But is this really the harm that's implied by the reference to risk? Especially when you factor in the experience you gain from a failed startup, it seems pretty questionable to say that serious harm will likely befall you. It's more like, less savings and a great experience will likely befall you.
So I wonder if the sentiment is just referring to the harm that may happen to the startup itself. As in, it's quite likely -- 90% likely! ;) -- that the startup you create will die. But isn't that kind of like saying it's risky to scratch off a lotto ticket that someone gives you? It's "risky" for the lotto ticket I suppose, but not really for you.
It's amazing how few people know that if your PhD doesn't cost -$12,000 a year or less you really are not doing something right.
My point was that because school systems are hackable, sometimes hackers will have hacked the signs of the costs involved. For example, my graduate school costs less than -$12,000 a year, but some peoples' schools may cost more than $12,000 a year (so they're not "doing something right?"). Big deal. In the long run, education wins financially and in terms of helping people accomplish their goals.
One can easily make the argument that startups are education, but obviously this consists of more than "Web 2.0" and a few other buzzwords thrown together at random. (I'm not criticizing Paul here, but I am criticizing the lunatic fringe that seems to grow around Paul.)
A few puffs of air in the right direction?
It's the model that has been woefully overlooked for 50 years.
Y Combinator acts as a startup hearth — just a little bit of support from money, but included is an environment which promotes growth.
But all it would have taken in the beginning would have been for two Google employees to focus on the wrong things for six months, and the company could have died.
Actually, it's even more interesting than that. Prior to AdWords (and, more importantly, the acquisition of Applied Semantics that gave them AdSense), Google did not have a real source of revenue. At all. Google Appliances were cute but negligible.
After AdWords and AdSense, they began to replace magazines, the yellow pages, and 411.
It is difficult to underestimate how important Ad(Words|Sense) has been to Google's success. And it was the idea of an intern.
That's not what your press release says:
What was the idea of an intern?
The self-service approach to buying AdWords, IIRC. The mail-order lobster nonsense that led to the streamlining of the horribly broken logfile/MySQL system when it became popular. I may be confused -- 'intern' may be the wrong word.
But if you want an example of a 'tipping point' or a critical decision I can't think of much better than Google and their ad sales mechanism.
I'm guessing that the "intern" that you are referring to is Salar: http://www.google.com/corporate/execs.html#salar
He was maybe the 10th employee of Google.
(Note this is the same paul who asked for more details on the intern, and who came up with adsense.)
The man just has a way with words! :)
It put me in mind of a fur-upholstered mousetrap for some reason. You know, the kind of thing David Bowie would put in his basement . . .
I guess it's a natural state of mind of any hacker: to be at the edge, have the best tools, best equipment, use best operating systems, etc. It applies to your investors as well. I'd hate to take an offer from a rich farmer or an oil guy.
Well... enough of YC for today, back to work.
In fact if you way back, there was another time when a couple of guys in a garage could do it all. Gates and Allen did it. Jobs and Woz did it. In history of personal computing there was always one or two guys who did it first without bunch of money: nearly every piece of traditional desktop application has that guy. Equipment and infrastructure costs have never been prohibitive since the invention of a PC.
As web applications grow the history will repeat itself: instead of two guys building it you'll need 20, just like it did with desktop software and games. There are only brief windows of opportunity for a "little guy" and they only come some major breakthrough in technology comes along.
The point is, YC is really smart money in real small amounts. If you need more money or don't need so much smarts behind it, you go elsewhere on the funding spectrum.
More generally our goal is to get startups closer to later stage investors, whether angels or VCs. Pretty near 100% of startups are looking for at least some additional investment.
People often say that the combination of team, market opportunity, and technology is what it takes. One typical cause for failure of great teams is that they are pointed at the wrong markets. The other usual cause is that the "great team" really isn't. I believe that your model, by encouranging early alphas, and by giving guidance serves to honestly vet the team and the market.
I think you guys are doing great work because you create new deal flows with a fraction of the money. That, in turn will reduce VC's risks, and lower their rewards. I'm going to guess that if you guys feed companies into VC deal flows, VCs will start looking more like banks and less like venture investors.
Within 48 hours of this being published, Google anounces layoffs ( http://news.ycombinator.com/item?id=134967 ) and a new search engine from Sequoia is covered by TechCrunch ( http://news.ycombinator.com/item?id=134291 ). In addition, the share price has fallen from US$747 to US$439 and there has been speculation by television pundits of it falling to US$350 or less ( http://news.ycombinator.com/item?id=133966 ).
Who's the competition? How did readers who didn't go through Y-Combinator get off of the ground? How'd you first get in contact with angel investors? Or incubators or seed funding or whatever...
As much startup rhetoric as seems to be kicking around this site and others, there seems to be a gap between "Go YC!" and "We just did our A-Round..."
We've been scrambling to get together as many contacts in the ramp up to quitting our jobs and there are some interesting leads, but before we start playing the find-funding-or-die game it seems prudent to have as many leads as possible.
As I said, just a subversive thought. I am sure it doesn't apply to any of us here ;-)
"As you work your way forward in the venture funding process, the ratio of help to money increases, because earlier stage companies have different needs."
Isn't one of the points of the essay the fact that, as a company progresses, the amount of help from a VC decreases relative to the amount of money received?
Though, I prefer the cogency of your analogy. Good read.