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Ask YC: Why do you disproportionately invest in younger founders?
38 points by dstorrs 1412 days ago | comments
Browsing back through the archives, I found this:

http://news.ycombinator.com/item?id=809233

I found the following thread interesting (quoted in part):

====== START QUOTE

5 points by jacquesm

[To pg] Are you willing to share the number of companies YC has invested in where founders were in their 20s, 30s, 40s, 50s or older ?

7 points by pg

I don't actually know the numbers. We don't keep track. But I know there haven't been any with founders in their 50s, and only 2 or 3 with founders in their 40s or their teens. Most founders are in their 20s or 30s. Completely guessing, I'd say 15-20% have founders in their 30s.

[...other posts and questions...]

10 points by pg

Off the top of my head, I'd say that older founders are more likely to succeed. They don't give up so easily. On the other hand, they also tend to have much higher burn rates, which make their startups easier for circumstances to kill.

====== END QUOTE

So, pg is essentially saying that 75-80% of YC's investment goes to founders in their 20s. But he also acknowledges that older founders are more likely to succeed.

I can see multiple possible reasons for this strategy...for example, if you are doing social investing, you might assume that older workers are already established and relatively safe, but those just starting out could use a hand. Or perhaps you care more about disruptive companies than successful ones and you feel that, although older founders may be successful more often, they will be disruptive less often. If, however, your goal is simply to make money, then it seems like you should be investing disproportionately in older founders.

So, what's the reasoning for your investment strategy?



pg 1412 days ago | link

The answer is a lot shorter than your question: we fund the best people out of those who apply.

As far as I can tell, the age distribution of people we fund is the same as the age distribution of applicants.

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dstorrs 1412 days ago | link

Thanks for satisfying my curiosity.

And yeah, sorry about the 'wall of text' -- I was trying to be very clear about why I was asking, and the fact that this was a request for information, not an accusation of age discrimination.

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jedwhite 1411 days ago | link

I guess with Dave Winer's post this topic is getting overdone and it's an older post. But there does seem to be a lot of noise around about startups and age and gender, especially with Arrington's post on Techcrunch this morning too, and I've been thinking about it since see the original post and pg's comments yesterday.

And, as I'm working on a startup but well out of my twenties, and have a co-founder who is a woman PhD student in the research lab in the computer science department at CU, we probably have a disproportionate number of discussions about age and gender in startups.

So with that disclaimer out of the way...

I think this is interesting. I believe absolutely that YC funds the best people out of those that apply as pg says. Judging the best people out of thousands of applicants would I imagine be difficult even with great judgement. But why would YC not choose the best possible people?

pg is quoted above saying "Off the top of my head, I'd say that older founders are more likely to succeed."

So if

1) the selection team reflects pg's view that older founders are likely to be more likely to succeed (and I think based on other comments I've read that's based on them being more persistent/tougher/resilient), and

2) the age distribution of those selected is the same as the age distribution of the applicants,

then there must be a counterweighting factor that offsets the view that older founders are more likely to succeed. Otherwise you would expect, all other things being equal, that older founders would be disproportionately represented in the selected teams, assuming likely success is one of the determinants of the "best people".

The higher risk and difficulty of maintaining a desirable lifestyle on a ramen income therefore likely have two impacts:

1) Fewer older startup founders apply as noted.

2) The perception of older founders as being more likely to succeed is offset by the perception, conscious or otherwise, that they are less likely to succeed on a "just enough" level of funding.

If this is true, I doubt it's a conscious selection bias, and there's nothing wrong in it. It's just a reality that these factors likely are going to impact any judgement of who are the "best people" for YC's purposes. The older founders selected are likely to have been standout candidates, like all the others selected.

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robryan 1412 days ago | link

Encouraging older people to apply could be valuable if in fact they do on average product better startups. I think the program, the up and moving to the bay area, the 3 months of building the startup out of an apartment, may deter older startup founders at first glance.

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leif 1412 days ago | link

Can you speak to why the applicant age distribution is so skewed?

I'd wager that older founders have more anchoring commitments, so while you can draw on a large (geographical) pool of young founders, you can only draw from the few older founders that happen to live near YC itself.

Of course, you have a lot more data, and probably a lot more insight into this question.

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pg 1412 days ago | link

http://news.ycombinator.com/item?id=1642815

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bradhe 1412 days ago | link

Pretty sure pg has said exactly the re: anchoring commitments (kids, mortgage, etc.) with regard to startup success -- not just YC acceptance -- a couple times before.

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arn 1412 days ago | link

...and this is a very big reason. If I was coming out of college I would definitely apply to yc. just to be immersed in that scene I think would be invaluable.

Even now, I'm financially secure, I still find it appealing, but uprooting my family (wife+kids) for a few months is not something I am willing to do.

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byoung2 1412 days ago | link

It's likely because most of the founders who apply to YC are in their 20's (and to a lesser extent 30's) because they are in a better position to live on ramen than older founders. Fresh out of college at 22, you are still used to living in cramped living quarters, eating cheap, and staying up late. As you get older, as you get used to full-time work, you get used to a better standard of living add on expenses like cars, mortgage, and possibly a family. I'm sure there are some who can do it, but it's harder to get a whole family to live on ramen while you pursue a startup.

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Towle_ 1412 days ago | link

It's (likely) not a strategy. Other explanations exist. You need to know more than just the age distribution of founders YC invests in. You also need to know the age distribution of founders who apply to YC. It's silly to assume that the age distribution of applicants is unlike the age distribution of those invested in if you don't have the data to make that claim.

If, for example, 20% of YC-invested founders are in their 30s and 20% of applicants are in their 30s, then in all likelihood age is a complete non-factor in their investment strategy. YC applicants are just disproportionately likely to be younger, due to the fact that older people are more likely to have financial dependents and commitments which make it far more difficult (if not entirely impossible) to do the 3-month-long YC experience.

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timr 1412 days ago | link

I was thinking something similar. Not knowing anything about the actual applicant demographics, my intuition is that they would skew younger.

From personal experience, the overlap of the sets:

1) of people over 30

2) of people who are entrepreneurial

3) of people who have actionable ideas

4) of people who are in a position to take income risks

5) of people who need the money/PR/connections that YC provides

is pretty small. There just aren't that many 30-something entrepreneurs who are in a position to need what YC provides, and who are able and willing to take a vacation from what is probably a substantial, stable income.

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jon_dahl 1412 days ago | link

From my perspective (early 30s), I know a ton of people who match all of these criteria. Even 4 and 5. Savings (4) can cover income risks for a time, and as it turns out, just about anyone can benefit from the PR and connections that YC provides (5). (The money, however, is almost a non-issue.)

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maxawaytoolong 1412 days ago | link

In my experience every programmer I know who is around age 35 has already worked at at least one startup and would prefer to avoid doing it again...

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jrockway 1412 days ago | link

I think he answered your question. Burn rate. YC does not give out a lot of money, and older founders probably burn through it too quickly to be successful.

It's kind of like that betting strategy where you double your bet every time you lose. If you have an infinite amount of money, you will always make your money back. If you have a finite amount of money, well... you lose everything very quickly.

Similarly, older founders may do well, but not before the money runs out.

(I had a coworker who was talking about a friends startup. Millions of dollars worth of initial funding for a project that's very similar to something YC invested in. If your $3000 investment fails, it's not a big deal. If your $30,000,000 investment fails, you become very unhappy. Since most startups fail...)

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pg 1412 days ago | link

We have had companies that have died quicker because they had high burn rates, but we haven't yet let this consideration affect our investment choices.

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jrockway 1412 days ago | link

Interesting.

Is there some self-selection going on where founders that think they can do more with less go for YC instead of someone else? Do people of the "first, let's buy aeron chairs, then we can worry about deciding what to make" mentality even know that YC exists?

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pg 1412 days ago | link

I think the main reason we get more applicants in their 20s is that the older people are, the more difficulty they have getting n cofounders to be free of obligations all at the same time.

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dstorrs 1412 days ago | link

I'm not sure that "older founder" necessarily means "first let's buy aeron chairs", or that "let's do more with less" means "younger founder, but ok.

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jacquesm 1412 days ago | link

That's called a 'Martingale'.

http://en.wikipedia.org/wiki/Martingale_%28betting_system%29

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michaelhalligan 1412 days ago | link

I'm willing to bet that people who have the capability of making $30m rounds are far less emotional about failed investments than the people making $3k investments

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jedwhite 1412 days ago | link

I don't think the primary driver for any startup applying to YC is cash. The value in YC or Founder Institute or Techstars or any of the other accellerator/incubators is advice, mentorship, learning and connections, and the implied social proof and credentialing provided by acceptance. It's easier to live on ramen noodles in your twenties out of school. Having done gone down that path, the sacrifices to do it with a family are almost impossible. It is rough when your little kid looks up at you when the school lunch account is overdrawn and says "I'm sick of being poor, Dad. When are you going to launch?" So it makes sense for YC to focus limited funds where it can get the best yield. Younger, highly intelligent males of extraordinary ability without mates who are out to prove themselves and build social status and wealth often do. That's why the crime rates are higher at younger ages too.

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jedwhite 1412 days ago | link

ps having said that, the young child in question's favorite foods do happen to be ramen noodles and pizza, he is teaching himself python and wants to go to MIT :)

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jacquesm 1412 days ago | link

Coolest comment ever :)

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gruseom 1412 days ago | link

YC have answered this a zillion times. The demographics of who they fund are the same as those who apply.

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danbmil99 1412 days ago | link

because they spell so well [edit:] more seriously, older founders generally have a network of potential investors. If they don't, that's probably a red flag. Also, they tend to have more stable life situations (read: greater cash needs).

So, they are not likely to benefit as much from either the cash or the contacts YC provides.

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Qz 1412 days ago | link

I would think a more stable life situation would involve lesser cash needs...

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jacquesm 1412 days ago | link

I thought it was because they know when to use capitals.

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vaksel 1412 days ago | link

it's because older people aren't as interested in doing startups(in comparison)...and those that are have a lot more commitments that they can't just get up and move to California for a YC session.

If you have less people applying, of course you'll have less people being accepted.

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mattmanser 1412 days ago | link

Sorry, have to call this. Older people start businesses way more than young people (example figure, avg age of a founder is 39 - http://www.businessweek.com/smallbiz/running_small_business/...).

It's just they don't need the relatively small amount that YC invests because they have saved it themselves or have the kind of connections at that point in life where friends/family can invest it instead.

Still, all the stuff YC does for a new business apart from the money is pretty awesome. I'd apply just for that if I didn't mind moving to the US.

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fgf 1412 days ago | link

start business =//= start startup

business = plumbing, food stall, import/export, constulting, YC company etc.

startup = YC companies and other similar intense low odds/high reward businesses

edit: vaksel stole my thunder

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mattmanser 1412 days ago | link

And I still think you're wrong. There's a young person centric round here precisely because this is the YC site. But figures of just tech startup founder ages are harder to find.

All I can now talk about is from personal experience. For example I know at least 12 startup founders (meaning low cost, tech centric startups) in Nottingham, working for 3 of those startups. None are/were under 25 when they started their business. The majority of them were over 30. Only 2 had started a previous business before 25. My friend has worked for 3 different tech startups elsewhere. All had founders over 30. Most of these people were married. Some had kids. They still started a business in the tech field.

Perhaps it's because the events and things I go to appeal to people my age, and the events the younger founders go to appeal to a different age. But I doubt it. What I suspect is that older people are probably more likely to go into b2b, the less glamorous startups, because it's easier money and most of these people knew the industries from working in them beforehand. And thus relied on existing contacts and sales forces rather than techcrunch et al. for publicity.

In fact it's almost impossible for an out-of-college/still-in-college founder to enter b2b precisely because they have no experience of that business domain or contacts in it. They can't see the opportunities unless they work in it. The only business they might know is the startup one.

In the end, my point is the idea that older people have no interest in starting tech-centric startups is wrong. It doesn't even make any sense. Do you think older people are scared of tech or something?

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vaksel 1412 days ago | link

it's because their idea of businesses isn't based around the web. They start more traditional business, since they aren't web centric like the younger generation.

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fezzl 1412 days ago | link

Small business != Scalable startup

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jacquesm 1412 days ago | link

title typo: dispropriately -> dis-proportionally

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gojomo 1412 days ago | link

The question is inapproportionate!

Without info about the pool of applicants, you don't yet know if YC invests disproportionately in younger founders.

And, even when compared to raw number of applicants, if older founders are underrepresented in those funded, that could be due to the universe of factors other than YC's preferences. For example, the best older founder-types may already be locked into other opportunities and obligations, making good older founders underrepresented in the applicant pool.

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lzw 1412 days ago | link

If you're managing your money reasonably well, and you're in your 30s, you probably have $15,000 in the bank in cash. I've never applied to YC because I've always had an order of magnitude more cash than YC typically invests.

People right out of college, or early in their careers who know they want to do a startup, and who haven't had the time to put aside this level of capital are the prime target for YC, and they are also likely to be younger.

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crcarlson 1412 days ago | link

A lot of people ask me why I applied to Y-Combinator in my 30's with cash in the bank. For me it was because YC offers big picture perspective on internet companies I could not get for a better price anywhere else. I also guessed that the community would be good to know, like a business school class. Now having been through a YC batch I can say the money provided was the least significant benefit and that the advice and community turned out significantly better than I had ever anticipated.

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jacquesm 1412 days ago | link

Which company was that?

Did you succeed at your goals?

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didip 1412 days ago | link

To my understanding the point of going to YC is to earn the connections, getting hooked up with really good business lawyer, free PR from TechCrunch, and maybe finding a capable tech co-founder.

$15,000 is just too little money to make fuss about. The free PR alone is probably as valuable as the $15K.

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SkyMarshal 1412 days ago | link

It's also a pedigree, the web/Internet/startup industry equivalent of a Harvard degree. Even if your startup fails, the fact that you got accepted by a program known for screening quality of talent more than quality of the initial idea is valuable.

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danhak 1412 days ago | link

My understanding is that most people do not apply to YC for the money

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tptacek 1412 days ago | link

And 35 year olds don't apply because they don't want to spend 1-3 years making 30-40k/yr. It's not complicated.

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replicatorblog 1412 days ago | link

When you think about it though, Plenty of 28-30 year olds take on $100K in debt and forfeit as much or more in lost wages to get an MBA. Through that lens YC and an angel round seems like a great deal relative to the network and opportunity you get.

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tptacek 1412 days ago | link

Very few 35-40 year olds are going to give up 75% of their income for any reason.

Nobody's criticizing YC here though; we're all just making the obvious point that YC trends young because people with established careers in tech make a lot more money in a year than many YC participants will see in several.

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danhak 1412 days ago | link

I'm not sure what you mean by this. Are you suggesting that older individuals are less willing to take financial risk? I agree with that, but where is your 30-40K number coming from?

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tptacek 1412 days ago | link

Ramen-profitable wages.

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danhak 1412 days ago | link

I'm still not sure I follow your reasoning. Admission to YC does not guarantee ramen-profitably nor does it preclude the possibility of earning a lot more.

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jon_dahl 1412 days ago | link

On the other hand, a majority of YC companies over the last year or two raise significant funding pretty quickly. A modest angel round can support a spouse/kids/mortgage lifestyle.

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swolchok 1412 days ago | link

I used to be under the impression that one was obliged to take a low salary while employed by or founding an early-stage startup. Your seemingly sincere comment and an anecdote from a friend who was offered a quite competitive salary are starting to change my mind.

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jon_dahl 1412 days ago | link

The general rule is that founders should pay themselves as little as possible. For some people, that's $30K, and for others, it's $100K. Just depends on where one is in life.

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maxawaytoolong 1412 days ago | link

Just remember that 100K/yr is "low" to the guys giving you your $10M series A.

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tptacek 1412 days ago | link

I can sum up your odds of pulling down a 10MM A round by saying "you are not going to get a 10MM A round".

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maxawaytoolong 1411 days ago | link

I've worked at 3 consecutive startups that each had $10M+ series A rounds...

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tptacek 1411 days ago | link

I'm sorry to have written something that could be misconstrued as saying "there are no startups that get 10MM A rounds", but I was actually making a more subtle point.

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maxawaytoolong 1411 days ago | link

I'm really stupid... what was your point?

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c00p3r 1412 days ago | link

People in their 20s are much more willing to take risks and sacrifice comfort and social life for a great idea.

It is good when it was their own innovative business idea, and not so good, when someone else's one (look at politics!)

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