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YC Annual Letter 2017 (samaltman.com)
417 points by sama on Feb 16, 2017 | hide | past | web | favorite | 151 comments

> 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.

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.

> 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.

That's only because you can't default out of student loans and are government backed. Which if you could default and didn't have government backing, students would never be able to get loans.

Real estate and businesses are riskier than a moderate investment in education.

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.


[2] https://medium.com/@andrewkemendo/the-ai-revolution-will-be-...

> I think the "startup community" needs to have a serious conversation about this...

I think part of the conversation is if Google et al are engaging on new kinds of monopoly practices that are not covered by the law. For example, the balance between the amount of information contributed by users in a platform like Twitter or Facebook vs. API restrictions to consume this information.

At the same time, antimonopoly laws don't help to create competition in, for example, the search engine space. Google innovation is unique in this aspect and even companies with virtually infinite budgets like Microsoft can't compete.

I'm not a huge proponent of trust busting. However as I wrote, we need to at least have a conversation about what impact these companies, who have massively outsized power to collect data, interpret and iterate products/services on this data, have on the market.

For a specific example: Lets say you are a PhD computer vision team and you want to create a machine vision API, where anyone can upload an image and return a list of objects in that image. Your product will be less capable than the Google Vision API or the Microsoft Vision API to start with, simply because they have orders of magnitude more data and personnel they can train their networks with. Now lets say you have a novel technique that is faster or needs less data. Ok, well more than likely Google or Microsoft would come to you with $XXM and offer to buy you out. You say no, we're gonna win this space. Well unfortunately, Google/MSFT personnel go to the same vision conferences, recruit equally if not more competent personnel and they just recreate your solution, even if slightly less capable. They also have a much bigger sales staff so they can always beat you at BD and support etc...

So the question in my mind is: Is the bar to compete unreasonably high such that you effectively need hundreds of millions of dollars to compete?

I use Machine Learning examples because they are literally where the biggest competitive gains and fastest growth are happening - also what I know the best in this case.

However I see this happening in almost every market, home furnishings (the market we play in most) is seeing the same thing, but with logistics/fulfillment instead of machine learning - such that the big retailers/manufacturers can take advantage of more efficient fulfillment than smaller ones can.

> Is the bar to compete unreasonably high such that you effectively need hundreds of millions of dollars to compete?

Yes, I think it is so high that we are launching startups in denial and the startup community, in general, is very naive. At the same time being [partially] irrational can be an advantage.

In this context, capital is critical. For example, Uber received almost $ 9B in investments, Spotify $ 1.6B and obviously those investments are oriented to having an advantage that goes much beyond building an app.

I don't think you can obtain an advantage creating a better vision API while you don't have access to the amount of information that companies like Google have. Sooner than later your algorithm will be used by anyone. You can find an apparent contradiction of what I am saying with what Google initially achieved with PageRank but nobody spent too much attention to mimic it at that time while Google was quietly running low cost server for years without revenue. When a few ones started to pay attention it was late: Google has a crawling at hyperscale and moved much beyond PageRank.

Looking at your company (http://www.pair3d.com) I found pretty exciting what you are building. I don't know about AI, AR, or your competitors but probably you have build something that goes beyond just using vision algorithms, and at the same time you have some kind of temporal advantage. I think you should focus on having an advantage at the distribution stage engaging companies to use your platform. Google et al can copy what you did but I don't think they are laser focused in the way you are doing it. Please take it with a grain of salt. You never asked for advice nor I know about your company, but I think it is good to talk using concrete examples.

I think you should focus on having an advantage at the distribution stage engaging companies to use your platform.

That's exactly what we're doing. Thanks for the well thought out response.

The barrier of entry s that Google and Facebook can throw much more data at a problem (even design future iterations of their products so that they gather the necessary big chunks). They can get away with better trained, more robust and generally simpler models with less concerns about overfitting (or using and abusing your model too much to match your data).

Twenty years or so ago, only Microsoft would have been on that list. It was being hit with lawsuits and Apple was on the other side because it wasn't on the list. The landscape changed and DEC and SUN are gone and Yahoo (hence the 'or so') and IBM don't have the relevance that they once did.

What happened is that the landscape shifted out from under many of the incumbents...from hardware to software. The one survivor (I won't consider Oracle because Altman didn't), was the one given an excuse to change its very profitable business practices by anti-trust prosecution. Not that it happened fast by internet standards. But super tankers don't turn on a dime and Wall Street beholden oil tankers probably turn even more slowly.

I guess my big take away is that AFGAM is more of a concern if the world is a finite pie and less so if it isn't.

AFGAM is more of a concern if the world is a finite pie and less so if it isn't

The infinite pie theory is for all practical purposes impossible. Growing pie theory works on beyond lifetime scale, but not for decade level scale. So it does matter because a startup can't last for two decades to try and gain market share against an incumbent.

I don't disagree. But money is a construct and not tied to gold or something similar, so the boundary of the pie is not fixed and what it is made of is not fixed either.

Anyway, Amazon is still the underdog going up against Walmart which twenty years on has really good technical chops and turns over a lot more goods and has phenomenally good logistics...think about who is going to benefit more from autonymous trucks. While it has the overhead of a vehicle fleet it is not at the mercy of UPS and Fedex and for a lot of goods, ordering online and picking up at the local Walmart is about as good as door to door shipping.

Anyway, in some ways Netflix is more likely to be crushed by Walmart than Amazon...and Disney is even more likely than either of them. As internet purchases and bandwidth increasingly become commodities, companies with long horizons become more formidable particularly in markets that matter...the players in the mobile market are Deutsch Telecom and ATT not plucky entrepreneurs. The big car makers are moving on self-driving cars and they already have down the really hard part of making cars...software can be copied.

What's AFGAM?

Edit: Amazon, Facebook, Google, Apple, Microsoft

Apple Facebook Google Amazon Microsoft

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

This was a running theme in the "original" PG essays. Every big startup story from that era seems to have an episode like Google offering themselves to Yahoo for $1m. PG (and others) spent a lot of time wondering why the big guys didn't just acquire startups en masse. Now they do.

And for most founders, taking that offer is a rational move, even when the company is quite mature. For a non-diversified human, a 100% chance of $50m is worth enormously more than a 10% chance of $500m.

What fascinates me is the strategy, pioneered by Facebook, of pushing that logic as far as it will go, and spending hitherto-inconceivable amounts of money to acquire any social networking or communication product that could possibly compete with it, long after they achieve product/market fit but before they're so big as to be a sure thing. I remember when $1bn for Instagram was a lot...

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.

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.

Even Myspace wanted to buy Facebook out, they refused. I think it is upto the founders as to what they prefer, 10% chance of something or 100% chance of something

It isn't that you can't dominate, but the thing is, you need to have a product that others can't copy.

If they're implying that a recent 'shortage' (if there is?) of Airbnb/Stripe/Dropbox sized successes is due to acquisitions, I'm not sure that's entirely fair.

I didn't read a complaint about premature acquisitions in between these lines. Though sama may feel that way about certain promising startups. I don't know.

I think he says what he means here; these largest companies "have powerful advantages that are still not fully understood by most founders and investors." And it's compounding. Given that, I think being a bit more cautiously considerate and unpresumptuous about these issues as well as on any views or insights one might have makes a lot of sense.

Basically this is a shitshow still in progress. There are startups that in hindsight had a too early, under-valued liquidity event. And there are many many startups that turned down acquisition offers never to see that many zeros offered again (I think Pebble just sold under these conditions). Whoops.

Also don't forget how a startup's risk profile and internal planning changes dramatically when/if an acquisition offer is turned down. Too early is not the problem here. If Amazon or FB wants to buy you and you say no, well good luck. Competitor risk is a real business cost and it can weigh you down no matter how fast you may be growing. If anything I see uneasiness more than complaint as the playing field has warped where hills are now mountains only giants can cross. The rulebook has changed too, startups aren't even playing the same game as large tech companies anymore. As the letter suggests, startups can play at the fringes and margins, then maybe try to sneak into grown-up business land but this is increasingly, laughably unlikely if you model it. What is more likely is startups miscalculating how big and lucrative their idea is and they are screwed, or they miscalculated how fast and easy Google can crush their prospects once Lar and Serge notice what you're up to. The options are lose now or lose later, with only the rarest of startups as exceptions unless someone or something steps to address the underlying structural realities.

agreed Andrew. We we need to democratize access to data. Of course, that does not mean that the underlying data needs to free. It can be expensive. But the data needs to be available.

If you are a self-driving car start-up today with $120MM in funding, you still have no data on how humans drive or how pedestrians walk. That's something that is going to be really important. And Apple and Google (both working also on self-driving cars) have a massive amount of data on drivers.

Put something together here: https://medium.com/safegraph/where-should-machines-go-to-lea...

> And Apple and Google (both working also on self-driving cars) have a massive amount of data on drivers.

That assertion may be correct regarding purchases, browsing habits (especially for Google) and places you visit via their respective map applications, but it doesn't compare to the staggering amount of raw data [0] that Tesla has on drivers.

[0] https://qz.com/694520/tesla-has-780-million-miles-of-driving...

Oh and they also don't care about you anymore. I feel like there was a time when you could sorta build next to one of these companies and then if you did a decent job they would make sure they don't step on you. Maybe I misread the climate, or eng talent was less plentiful then, but these days it doesn't seem friendly in tech. When we founded the company I'm a part of today I was strongly advised against it by a group at google as if they encountered us we wouldn't be successful. Not that it stopped us, but it didn't feel very good when we had just gotten going.

Well I think everyone looked at what happened to PARC and said, "no way that is happening to us", so lets keep it quiet, and don't collaborate as much.

The competition is too high now to be friendly.

And there's the stories like the valve engineers helping oculus out only for oculus to launch on Kickstarter and be a major competitor to valves own VR efforts.

I'm definitely glad to see someone realizing these giant vertical tech companies pretty much will only be solved by antitrust action.

Our antitrust laws have been focused primarily about the anticompetitive aspects of owning a whole market, but has missed the boat so far on the anticompetitive aspects of vertical integration. Google simply doesn't have to compete in many cases because it's stronger products promote and protect it's weaker products.

Users tend to either be Google people or Apple people or Amazon people, and that trend is only getting larger.

> Our antitrust laws have been focused primarily about the anticompetitive aspects of owning a whole market, but has missed the boat so far on the anticompetitive aspects of vertical integration.

This is simply historically false; vertical integration has been a central focus of antitrust law from day one (it was a key consideration in the drafting of the 1890 Sherman Act and the 1914 Clayton Act.)

I guess my question then would be, if vertical integration is adequately addressed by antitrust laws, how does a company which is the dominant power in search, mobile, and email manage to exist, while continuing to buy companies that bring it into dozens of other business markets, while proudly proclaiming that integration as a primary feature?

Because antitrust law recognizes that while vertical integration can have consumer harms, it generally does not (and often benefits consumers), so while it addresses vertical integration and includes mechanisms for addressing harms from it, it does not generally prohibit it or even seek to prevent it the way it does monopolization.

Also, most of what you describe is participating in multiple markets that aren't part of a vertical supply chain, so while it is integration, it's not vertical integration.

"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.

Pretty impressive that HN has mostly maintained the level of quality it set out to, especially with 350,000 users per day. I'm always relieved that there is a place on the Internet I can go where 90% of the comments on the page aren't "me too thanks".

Moderation does a dang good job

Those numbers surprised me to, but I don't think they should have. I rarely meet anyone in software that doesn't know at least know about HN, if not actively read it. In fact, my sister's boyfriend is in tech even though she isn't. When I met him for the first time, my sister felt a little left out because we immediately got into a deep discussion about an article we read on here. We live across the country from each other, but reading hacker news is almost expected for both of us.

I would love to see how many of those are lurkers. I've been reading hacker news for almost 3 years now but made my very first comment less than a month ago (fat thumb logged out on my iPhone and couldn't remember my password so this is account #2).

I have over 8 years of daily Reddit use with 0 comments made as well. Just a personality thing.

Now I can see where the Hacker News Hug of Death comes from. That's enough people that even a subset might kill a small server. More than I thought, too.

I am sure there are many more lurkers than active participants

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

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.

For sure, with 6,000 comments and 350,000 daily users.

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 ...

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

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!

"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.

Any evidence of this ?

YC continues to support my company nearly seven years after our batch, even though we're still tiny and have no plans to exit (and thus will likely never give them any financial return).

Sorry for not having mentioned this explicit (it is in my profile) but this is from first-hand experience from being a founder and having going through YC with Bitnami

love bitnami - you guys have helped me so much on AWS!

I'm pretty sceptical that the phrase isn't a bit of marketing to some extent, but one thing (among many) that earns YC a ton of respect in my mind is YC Research. The research projects truly seem geared toward working for a better world as their first goal.

Interesting that you chose to post this proactively.

Even if you know the truth behind a statement like that, it's hard to read something that earnest and not have an initial eye roll in response. As someone who doesn't know the YC team's motivations, it's nice to know that at least someone thinks that some of the earnestness is real.

Maybe I'm a fool then because I would read that and take it in earnest as I read and take much of the HN community in earnest. I have a great deal of respect for YC and the HN community - I guess the point of my original post was it's a little disappointing that isn't the case.

Maybe you just haven't watched the show "Silicon Valley" ;). It's all about "making the world a better place." ;)

Whenever I talk to other founders about YC, encouraging them to apply they are often asking about "what the catch is", "yeah, yeah, but how are they really?" because they don't believe it is really like that. It has become kind of a joke the phrase "making the world a better place" but YC is one of the few places where they mean it

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.

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.

Actually, the fact that they have not bowed to the pressure to "disavow" Peter Thiel merely for his political views in one of the things that makes me think highly of YC.

Yes, that sounds much more useful to the world than, you know, not partnering with people that are happy to harm it.

That is just your opinion and echo chamber. I give a lot of respect for them for not doing so.

Of course, it's because of money, since Thiel is powerful -- any other guy would have kicked out immediately, but nevertheless considering SV is a liberal echo chamber I give them some respect.

Now only if they has protested against Obama wiretapping the whole world as well...

I up-voted you.

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).

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.

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.

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


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.

    >> funded over ... 1,470 companies
    >> more than 50 of our companies are worth more than $100 million each.
3.4% is a remarkable ratio.

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.

Is there a list of those 50 companies?

>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?

All of the above.

YC's software lets us evaluate thousands of applications per year and use the data we generate to continually get better at that. We also run bookface, a private site just for YC founders.

Sometimes overlooked is the importance of the software that we make accessible to everyone: Hacker News, of course, and our soon-to-launch MOOC Startup School.

Bookface is one thing I know of: https://bookface.ycombinator.com/

I think they developed it in-house.

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.

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.

When people talk about an age, it doesn't usually start with the invention of that thing. The bronze age didn't begin with the invention of bronze.

The periods are subjective, fuzzy things. I think I agree with Sam's definitions although I would probably say age of machine learning rather than age of AI.

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.

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. ;)

"Most tech people" must mean people under the age of 25 without much knowledge of history.

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.

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

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?

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.

"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.

Maybe just making the downvote button more like the "report" button on facebook. Force people to either select from a few common reasons, or leave a comment to explain their downvote. This could also gently enforce norms for what the downvote is for, since some people new to HN might not realize it isn't the same as reddit. Obviously there are details to iron out, but I think it would be helpful.

Reddit and many subreddits have rules that downvoting should not be done for disagreement.

HN has no such rule.

I think that's because hacker news is actually smart and not delusional like reddit. On reddit it's a de facto disagree button but a de jure spam report button. It's like they are in denial of what 99% of users use it for or they just don't want to admit it and ignore that fact.

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.

where is the list of 32 companies?

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...)

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

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?

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...]. Arguably the market conditions were driven by the 2015 - 2016 Chinese market turbulence [https://en.wikipedia.org/wiki/2015%E2%80%9316_Chinese_stock_...], but who really knows. Growth has picked back up this year and I’d expect job growth to bounce back.

Maybe SF is just full? At some point that city will no longer be able to support and endless parade of Python developers in skinny jeans. Also, decelerated job growth is still job growth. 3.5% growth doubles in 20 years. Not exactly panic time.

@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?

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.

> 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.

Usually the product comes before the mission. Google's product was a search engine with better results than existed, but their mission was "to organize the world's information and make it universally accessible and useful". That mission statement was a key part in them getting key hires.

Uber's mission is "Transportation as reliable as running water."

Facebook's mission is "Make the world more open and transparent."

The product is about what the company does today, the mission is about what the company will do in the future. It's usually not a good idea to come up with the mission statement before you have a viable product, but it's critical for bringing on board employees, executives, and investors.

- Facebook's mission is "Make the world more open and transparent."

That was not their original founding mission. It was

"Thefacebook is an online directory that connects people through social networks at colleges [Harvard only][2004]"

In 2006 that mission was changed to include other universities and colleges.

Which is a long way from their current stated mission. In other words, mission statements evolve - and the founding mission is seldom the final mission for many companies.

If these were their real missions most of these companies they would be doing things very differently. Facebook transparent? Not a chance. Uber reliable? Not with surge pricing etc

So, there's this weird effect where basically every major company has a gigantic fundamental hypocrisy in their mission statement:

Google's is "organize the world's information and make it universally accessible and useful", and yet - if you leak anything about them as an employee, you are insta-fired. If you try to figure out any sense of organization about their product portfolio, good luck. If you try to scrape any of their results or content, you will be banned quite quickly.

Facebook's is "make the world a more open & transparent place", and yet they have done more than any company since AOL to turn the web into a series of walled gardens. Plus Mark Zuckerburg bought the 4 houses adjacent to his so that neighbors couldn't look onto his property, and walks around with a 24/7 security team.

Uber's is "make transportation as reliable as running water", but their goal is for people to give up their own cars - which they can use any time, any where, for zero marginal cost - to be at the mercy of Uber's service.

Palantir's is "Palantir Technologies is a mission-driven company, and a core component of that mission is protecting our fundamental rights to privacy and civil liberties", and they sell to the CIA so they can spy on you.

At the same time, these companies also do many things that actually are in accord with their mission statements.

I think that you can reconcile this by realizing that the fundamental imperative for every company is continued existence. Those who fail at this are replaced by those who succeed. The mission statement is a tool to ensure continued existence, because it serves to align & recruit employees with similar values, without which there would be no organization. But when there are other imperatives that are necessary for the company's continued existence, even when they contradict the mission statement, the company's existence takes priority. Hence Google is very strict about their proprietary information, even though their mission is to make all information universally accessible; Facebook wants all content on Facebook, even though they claim to be about making everything open & transparent; Uber wants to make transportation reliable & easy, as long as it's on Uber; and Palantir wants to protect civil liberties only so long as it involves buying Palantir software.

Is there a standard term for the tension that arises from people depending on the existence of the things that they get paid to mitigate? I've heard people mention the potential conflict of interest where anyone who gets paid to do something would lose their livelihood if that thing stopped being necessary, so in a sense we all have reasons not to want to solve things too well or too completely.

That's not exactly what you're talking about in each case, but it could be relevant.

> Uber's is "make transportation as reliable as running > water", but their goal is for people to give up their own > cars - which they can use any time, any where, for zero > marginal cost - to be at the mercy of Uber's service.

I'm not sure what car you're driving, but in my experience there is a significant marginal cost. I no longer own a car, exclusively using public transit + Lyft, because I don't want to deal with maintenance, paying for parking, gas, insurance, etc.

Maintenance, insurance, etc. are largely fixed costs: you have to pay the same for them regardless of how much you use the car. (Pity for me, I've got an 8 year old car with < 30k miles on it.)

Parking in the suburbs is subsidized by business owners & the city itself - you can usually park for free, and the price of it is reflected in land values.

Gas is the only marginal cost for suburban driving, and I can basically guarantee that Uber costs more than gas does. The marginal cost of driving across Silicon Valley, in gas, is under a dollar.

> Palantir's is "Palantir Technologies is a mission-driven company, and a core component of that mission is protecting our fundamental rights to privacy and civil liberties", and they sell to the CIA so they can spy on you.

The CIA doesn't spy on Americans.

I saw Zuckerberg walking in Palo Alto with wife, child and dog and no security visible just over a year ago. If he has 24/7 security, either they're very discreet or it started recently.



I would bet on them being discreet. Good security is very good at making people unaware that security is present. I recall showing my relatives around the Googleplex when I worked there, having my brother-in-law comment on the seeming lack of security for such a high-value target, and then telling him "No, they're there - if you try to walk off with a laptop or take pictures of something you're not supposed to, they'll come running."

I don't have a link handy, but it has been documented that Zuckerberg outspends all other CEOs on personal safety by a huge margin (something like x10).

Consider that Steve Jobs famously chided his friend Larry Ellison for having 24/7 bodyguards.

Probably a very discreet security detail. Not all of them need to be man or have the same haircut.

The companies as they are today may not be achieving their mission - that doesn't mean that they won't in the future.

Facebook has succeeded in making the world a more open and transparent place - people have the ability to share information that matters to them and have people around the world find out about it. There are fewer places around the world for those in power to hide information away now. That's different to whether Facebook as a company is transparent.

Uber likewise may or may not be reliable now - surge pricing only ever increases the price of an Uber to the same as the price as a black cab where I live, but it's pretty clear that Uber's ambitions of self driving cars do not include surge pricing.

Theres no discernable progress towards their mission.

Call it what it is, PR puff.

I agree about Facebook, but surge pricing is exactly what makes Uber reliable.

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.

> (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.


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.

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.

Focus is on the word "other," here. Paul's been consistent about the need for both something that immediately solves a real problem, even if it looks like a toy to _other_ people, and a big picture key idea.

Perhaps you're mis-remembering and rather rely on PR narratives and more erroneously you're conflating intentions and mission.

When Larry and Sergey worked on their PhD thesis of an algorithm to rank pages relative to each other, went to a party, and received a $100k check in the garage, was the pitch really "to organize the world's information and make it universally accessible and useful" or did they arrive to that later?

Likewise, when Travis rolled off from Scour to connecting for hire cars that sit idle, again was the intention already "make transportation as reliable as running water, everywhere, for everyone" or did they arrive at that later?

And Mark in his dorm room figuring out how to scrape and upload his classmates photos to a PHP website, he was delightful with glee that he has achieved his mission of "making the world more open and connected" or did he and others figure that out when he moved out here to Palo Alto?

These things took off, they got more money, the money brought more help, more help created an organization.

Mission statements, like code, is refactored over and over then massaged by marketers and publicists and recruiters until it hits you.

I think you may be mixing up the state of the company and/or its mission at the time of founding/early investment with their state at the present time.

> 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."

I don't think that was from the get go.

> 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.

Yes and no. I most certainly don't view Google in a negative light. I'll admit I view Facebook as largely existing to promote rampant consumerism. Snapchat...don't even know where to begin.

Nonetheless - the point of my comment, and why I found sama's statement interesting - was the assertion that lacking a large, important mission statement (or big hairy audacious goal, if you will) is an impediment to growth (or ability to "become very large".) When you look at the winners - they usually do have a lofty, all encompassing mission statement - but it would seem not to have been that way at inception. If anything, I thought the preaching in the startup world has been about finding a niche, an angle someone hasn't seen, make something people want...and then expand from there.

A final thought - even Y Combinator itself seems an example of this (at least in my eyes.) What started out as a fund/startup incubator is now truly trying to tackle and invest in very audacious things (such as Universal Health Care.) It's able to do that now that it has become a successful, large brand in and of itself.

Google's mission has been "to organize the world's information and make it universally accessible and useful" since day one [1]. You're confusing mission with strategy.

[1] http://www.businessinsider.com/laszlo-bock-on-google-mission...

Not only that but the actual improvement was so substantial it might have well been a different product - a web search engine that actually works.

In fairness, he does state that this is just about his boredom. At the end of the day, its up to him and the YC stakeholders to decide how much his personal boredom is worth in terms of returns and missing The Next Big Thing.

The danger is in forgetting that all the big companies with lofty mission statements ("Make the world more open and connected", "Organize the world's data") did not start out that way at all. They didn't develop them until well after the point that some place like YC would be investing.

In fact, there might be an inverse correlation: companies that start out with huge, inspirational missions before they even have a user / customer are more likely to end up failures. I could think of many reasons why.

> 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.

Says the man whose first big exit was Loopt, a drain-circling "Grindr for flip-phones" that only got acqui-hired because a Sequoia Capital board member who'd invested in Loopt pulled strings to get Green Dot to buy it and cover his investment. Harsh, I know, but hardly inaccurate:



I think this is an important point that's worth addressing. It does seem like most successful startups stumble onto their idea, and their mission statement is usually a post-rationalization [1].

The question of "Does it come down to luck or is there a repeatable process?" is critical to YC's success. I think PG and Sam have made great contributions to discovering a repeatable process, but because they're so prestigious now and attract the best startup candidates they can basically just filter for the ones that already have traction.

I'm a huge fan of what Sam's been doing with YC, but this is what I miss the most about PG. PG didn't have any brand to benefit from, so it was critically important that he understand the physics behind successful startups so that he could deterministically understand which ones would be successful or not before they were already obviously successful. YC doesn't have to do that anymore, they can just choose the startups that apply and already have customers and revenue because they get so many applications.

My gut tells me that the next step in developing a repeatable process for successful startups is a better understanding of markets. If you look at all the startups you mentioned (not Google, but Uber, Facebook, Snapchat), they all applied a relatively simple technology to a new market that the founders had a unique perspective on. Uber had unique access to the SF population that's constantly frustrated by transportation options but quickly embraces new tech, Facebook tapped into the market of college students that most VCs and entrepreneurs overlooked because they weren't in college, and Snapchat did the same with an even younger market. I'll add Slack to the list as well: they built an equivalent product to HipChat and Campfire (which were created years before Slack) but targeted the market of non-developers.

1. It's hard to find supporting evidence, but I have never seen or read a mission statement from a company before they were already massively successful.

All these companies have mission statements. Whether a potential hire, potential investor or anyone else chooses to believe or be cynical about that mission is something else. Seems like there's always a spectrum among employees from the kool-aid drinkers to momentum-seeking remoras just hitching a ride. Still, even when an employee is skeptical or cynical about the company's stated mission initially; the more time someone works somewhere have you not seen man's search for meaning kick in...an employee often will create their own mission why they are there, real or not.

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

If you measure missions by how much the potential audience wants them to succeed, I'd say this is pretty huge.

That doesn't necessarily make it a very compelling thing to work on, but "safer sexting" is way more important than "ads on everything."

May you didn't get the point (or maybe I didn't) of what Sam was meaning. I think at the very beginning companies don't know what is really the mission, they are experimenting. But these companies just start to grow when they realize what is their mission.

It's less about mission and more about culture/ethics. A good mission will engender a culture that people will be attracted to, but even if the mission is not super sexy, with say search for instance, Google's culture and ethics attracted people.

Keep in mind that google's mission evolved over the years.. but at the beginning, they still had a clear mission of making it easy to search the web (compared to the portals that forced you to their bullshit content).

Ha, classic straw man argument

I wasn't really arguing with sama - just making some commentary on a small part of a larger document.

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!

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.

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.

It was tongue in cheek.

Or, alternatively, a place for mediocre minds to meet and become truly terrible, together.

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.

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.

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


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 :)).

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.

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

Hm. Wonder how it could've leaked. I have to imagine that this incident impacts the likelihood of you sharing something like this with the YC network in the future. I would support rooting this person out and giving a stern warning.

Other possibilities, besides someone being untrustworthy, is that the journalist was bluffing. Or perhaps someone's account was hacked.

Agreed that it's not an important part of the post, but as someone currently reforming my ways from double spaces to single, I have to admit they are right. Double spaces after periods are a vestige of the past.

Lol. I once worked with a guy who, when asked for his input on critical emails, would meticulously comb through and delete second spaces after periods. "What did you think? Did you make any changes?" "I removed all of the double spaces after periods." :)

i beg to differ. i believe it adds colour to the general grey-ness in various internet neighbourhoods. tl;dr whatever floats your boat.

Double spaces help make it easier to read. Perhaps a matter a preferences...

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

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

So Sama is a 9gagger.

"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

Not to me.

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

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

I'm curious if that's by design or coicidence. Generally when taking s small sample size (funded) you expect the majority to be over represented and any minorities to be under represented until the sample grows to a large enough size to eliminate the variance.

> 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?

We detached this comment from https://news.ycombinator.com/item?id=13662204 and marked it off-topic.

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