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Jason Calacanis' Warning To Y Combinator Startups [video] (youtube.com)
209 points by hajrice on Aug 29, 2010 | hide | past | web | favorite | 123 comments

For those who prefer reading, or can't reach Youtube, etc.

"This is a message to YCombinator companies and hopefuls: if you tell Facebook about your startup before you reach critical mass and you get found by Facebook in any way you're an idiot. They will steal your company's ideas and try to get you to take a small price for your company and vision and take a job at Facebook. Which by the way is going to be a job that sucks. Don't do it. It's a scam. It's a trap. It's a trap. It's a trap. Insert Star Wars quip here. It's a trap. IT'S. A. TRAP. End of message."

Minor correction.

s/you get found by Facebook/you get involved with Facebook/

This sounds completely bizarre. If your ideas are such that they can be stolen and executed upon by others trivially, than a job at Facebook (with a signing bonus) is pretty damn impressive exit.

Given the timing I think it is pretty clear that he is talking specifically about YCRFS7. If you're building something on top of a platform there is always the danger that the platform provider will decide to incorporate your product as a feature. There is certainly a lot of precedent for this — in recent years Apple, Twitter, and Facebook have all done it.

Say what? Posterous isn't rocket science, but I'm pretty sure they wouldn't consider a signing bonus at Facebook impressive.

Posterous is out in the open for everybody to see. Why hasn't Facebook "killed it", then? Understanding user behaviour and preferences is part of what makes something defensible. Not having to build a product to operate at Facebook's scale (and expectation of reliability) at day one is a way to help discover people's preferences, especially for a "new idea".

There is no startup success that this argument can't attribute to the intangible "understanding behavior and preferences", and no signing-bonus exit that the same argument can't dismiss the same way.

My point is simply that there are a lot of very straightforward ideas that merit far more than a signing-bonus exit.

Can you elaborate on "understanding behavior and preferences" with some example behavior and preferences, please?

There are many bases of competitive advantage, but I don't have a clear picture of this one. The main customer-side advantage I see is that your product becomes identified with the idea/technology in the customer mind (perhaps of a tiny niche) - not that it's better than something else, just that it exists. But there's still a problem of getting to this state.

Greenspun has an even better explanation of this than I do:

The most reliable source of supranormal profits is superior knowledge of one kind of customer (Way #3). Ideally this will be the kind of customer that larger companies are overlooking. The founders of SAP, for example, were employees of IBM Germany for many years and got exposed to the accounting challenges of large manufacturers. When they quit IBM, they were among the best situated programmers in the world to build an accounting system for manufacturing companies. It is not because these guys were the world's best programmers that SAP is today bringing in $10 billion per year in revenue and has a market capitalization of $60 billion. It is because these guys were the best programmers who understood the problems of their customers.


Thanks! Domain knowledge - but applying this to a mass market feel a bit mind-bending to me.

Of course, it's still problems and knowledge, and so not qualitatively different from those in a specific niche. I guess the misleading thing is that by the time a mass market is mass, they are well-known (or appear to be). As an example, Youtube was once small. And while the consumers were perhaps (?) easy to understand, the producers (who created the value), were a much smaller group, a more specific kind of person, using specific new tech (mobile phones) with specific problems. And it only later grew into a mass market (though I guess arguably the producers are still "one kind of customer".)

Ideas can always be stolen. We've had so called investors try to rip us off left and right. Don't think Facebook isn't capable of the same.

>Ideas can always be stolen.

Ideas can never be stolen. If I have an idea and tell you about it, then you use it, I've still access to that idea and can still use it too.

Yes I worked in IP for a time. Yes I'm a pedant. But there is a very important distinction both morally and legally between theft and copying (eg tortuous IP infringement).

Tell that to someone who's had an idea copyrighted/patented and used without their permission.

You mean like when those guys making the JMRI model train software that had some jerk company take their code without respecting the OSS license, then patented something they'd been doing for years and counter-sued them for infringing that patent when they tried to get them to respect the license?

Yeah, I'd call that stolen (or at least 'attempted theft'), because they were about to lose their rights. Thankfully, the JMRI guys won in court, so they got their rights back.

Facebook has the money and scale to implement anything they choose to. Trivially or not.

Yes, just like google, right. Google video completely obliterated those youtube upstarts. Oh, wait.

That a company has the money and the scale to implement anything they choose to, trivially or not does not mean they will actually succeed in the marketplace.

Small companies doing one thing have something big companies do not: relentless focus.

YouTube has a social network behind it. That's what Google bought, because to date they have yet to build one of their own.

What a startup can create that a large company cannot steal would loosely be defined as a social network; mind-share among people who believe that your company is the go-to place for your service.

If you have built your service on top of Facebook, it will be very difficult to build your site so that you, and not Facebook, are what your customers thinks of when they think of your product. If it's truly a killer Facebook app, they will likely even be happier with a slightly inferior but fully integrated solution. Because they control the social network, the mind-share, that fuels your app.

Google could have waited until the bandwidth costs and the lawsuits from Viacom ate them alive. Remember, Youtube hasn't even become profitable yet. Google already had a capable clone. They just lacked the community because they were a late arrival.

If Google's Sergey, Larry, or Schmidt were as ruthless as Zuckerberg, I have no doubt that Youtube would have been left to die.

Or Google could have waited until youtube was bought by Microsoft. Or Viacom. Or Disney. Or Apple. Then they would have had a formidable competitor with a significant advantage.

Things just aren't that simple.

I doubt every other company on that list could have made it successful. Even Google with all its "dark fiber" bandwidth has not been able to make it profitable after 4 years.

Viacom is simply not interested in running a money losing venture, otherwise they would have bought Joost instead of partnering with them. Disney didn't need the Youtube brand when they already invested heavily in go.com back in 1998. Look what happened to Hotmail dominance after Microsoft bought it. And what is Apple's experience with web apps?

So yes, things just aren't that simple.

Google didn't buy Youtube out of goodness of their hearts. If it wasn't them, I'm sure there was plenty of other companies that were looking to purchase, and I'm sure at least some of them have the necessary resources to deal with bandwidth/legal issues

I never said Google bought Youtube out of kindness.

I said that Google had the option of letting Youtube weaken, and buy them at a discount...or fully letting them die out and have Google Video dominate. Each decision with a different risk/reward ratio. They chose the lowest risk/reward since $1.6 billion is probably a relative drop in the bucket for them.

They just lacked the community because they were a late arrival.

And I could have bought McAfee, I just lacked $7.7 billion.

Google is expecting YouTube to become profitable in 2010.

I'm trying to understand. I think youtube beating google was due to network effects: youtube had enough content that it was hard to displace (it was actually more valuable.) Secondarily, it had mindshare (people knew about it.) Possibly, they "understood user behavior and preferences" better (strlen mentioned this intriguing one), and they used this to make it easier to use (slightly more valuable + massively more adoptable.)

Relentless focus on the above factors (content, mindshare, usability) helped them win - have I missed any?

First mover advantage. Youtube was synonymous with online 'canned' video, google with 'search'.

By parking it under the google brand they may have made a mistake. Another - possibly small - effect of that is that you have two steps before getting to a site, video.google.com, is less convenient than youtube.com, and much less easy to promote as a brand separate from the search portion of the site. Many people read 'video.google.com' the same way they promoted 'images.google.com', as a search engine for online videos (which it now has become, for the most part) instead of an easy way to share your videos with your buddies and the rest of the world.

I don't think it will be possible to quantify this effect, but I notice that microsoft named their search engine 'bing.com' after several tries of doing it as a subsidiary, and that google has not attempted to bring youtube.com under the google domain as the replacement for video.google.com (which still exists), it is now the 'search' arm of google for video, returning youtube.com mixed with other video results, just like what you'd expect.

Thanks! Interesting, a strong brand can be a negative.

Further thought: google video was 'better' in that it had higher resolution videos, and it displayed more of them on the screen at once. While youtube had one low resolution video. It was quicker to load and to run, and more suited to slower machines (perhaps especially mobile phones, whence videos oftentimes came?) Google video has always annoyed me in this sense. I note that now, they've increased youtube video resolution (it's 'better'), and also snipe: upgrade to a "modern" browser. Although understandable, it isn't the path to max adoption, and max. network effects

Maybe you could do a write-up on all your findings and how they mesh together, it would make for interesting reading.

Thanks, I appreciate that and might do it, though I don't yet feel I have more than my write up of 2 months ago: http://news.ycombinator.com/item?id=1508379

Implement and succeed are very different things.

If you want a job at Facebook then apply directly. Building an entire business just to get hired at a company seems excessive and contrary to the reason most people start their own business.

That was (sort of) my point. If you build something fairly trivial and not defensible on its own, "talent acquisition" is a rather good outcome.

Not completely true, sometimes being first matters.

Most times, it doesn't.

As viscerally unappealing as it is to find myself agreeing with Calacanis, I'll note that Facebook doesn't even need to intend to trap YC companies for the net effect to be negative. The problem is the same as with "strategic investors": an early, quasi-structural relationship with a potential acquirer may be perceived as a de facto right of first refusal to the rest of the industry. It can be a trap even if it wasn't designed to be!

I sort of watched this happen with a friend's company.

Obvious caveats apply: (a) I'm not a social networking entrepreneur and don't know the space that well, (b) you have to balance the risk --- and the opportunity cost of another business in a different market --- against the benefit of collaborating with Facebook, (c) to whatever extent Facebook benefits unreasonably from this program, YC probably suffers.

jason is making it sound as if he personally knows someone who made this mistake. i think you're claiming the same, and based on how many (few) acquisitions facebook makes, it's possible that you both know the same person who feels they were "trapped." can you say who it is, or did you intentionally leave out the name of the person you know?

edit: sorry if i misread this part to imply it had to do with facebook: I sort of watched this happen with a friend's company.

I don't know anyone who's been scammed by Facebook. I like Facebook.

If a bunch of startups that might have grown big were nipped in the bud by Facebook, it would be as bad for YC as for them. So Jason is essentially claiming that by agreeing to let YC-funded startups get early access to Instant Personalization (which is all this deal amounts to), we were acting against our own interest.

That should at least make one skeptical about his claims. It is possible that we've done something that wasn't in our interest, but surely by default one should assume we understand and care about our interests more than Jason does.

Or to put it more briefly: this is mere linkbait.


Respectfully, it is not linkbait.

This is my honest opinion based on Facebook's track record. I would give the same advice to any startup: don't trust Facebook and don't give them any access to your startup or plans.

Period. End of story.

If an entrepreneur needs any evidence of the trustworthiness of Facebook, simply talk to folks inside of Quora, FourSquare, Twitter and Zynga (among others). I'm sure you've spoken to folks inside these companies, like I have, who are infuriated with Zuckerberg's blatant stealing (without innovation).

At every chance they can get, Facebook has simply stolen. Given their scale, bringing them inside the incubators is, well, mind boggling.

If you're a startup company you should be avoiding Facebook and their staffers.

I'm sure you have great intentions PG, and you know I respect all that you've accomplished, but don't dismiss me. I really don't need press because, to a certain extent, I am press.

Add to that the fact that I'm massively overexposed (especially here on HN), and you're claim that I'm link-baiting feels disingenuous.

Like you, I love startups and entrepreneurship. I only want to see folks do well and not get ripped off by Facebook, which I consider the most unethical company in technology.

One only need to look at the mountain of lawsuits they've generated for proof of this. Facebook's long list of lawsuits are not from ambulance-chasing law firms mind you, they are by PARTNERS and FRIENDS of Zuckerberg's! Oh yeah, a lot of the lawsuits and complaints are also by privacy groups and government agencies trying to protect citizens.

If Zuckerberg has no problem screwing his friends, partners and customers, what do you think he will do to a three-person startup that might innovate its way into being competition for him?

I fear you've made a big mistake letting the fox into the henhouse.

Startups: listen to PG on everything since he's brilliant--but take my advice on this one. :-)

best jason

I understand what you're getting at, but I also think that pg was justified in taking offense to your claims. What you're offering the startup community is speculation. What you're suggesting is plausible, but you haven't really backed it up with logic suggesting it's probable. Startups need more than the opinions of a few disgruntled competitors to base their decisions off of.

Think about it. There are two possibilities:

1) Facebook is trying to ensnare startups into its web of twisted lies so it can destroy them.

2) Facebook is just trying to work out a mutually beneficial deal with startups that want to leverage their technologies.

While #1 is possible, you have to admit that #2 is the more likely situation. It's like Sagan said: "Extraordinary claims require extraordinary evidence."

I'm sure you know what you're talking about, so this should be pretty easy. Give the startup community sound logic rather than speculation.

Many of these features are not hard to implement. Did google backstab twitter when they invented buzz? Did twitter and foursquare enter any sort of partnership or contract other than automatic api access with facebook?

This is why he says "…if you tell Facebook about your startup before you reach critical mass"

If you're at critical mass, you might be able to hold your own. Foursquare and Twitter have enough users and industry clout that they can hold their own. If you're just starting on an idea, maybe you're getting a little bit of momentum, it might be tempting to talk to someone at Facebook and see if they will help you.

But… It's easier and less risky for Facebook to just implement your idea themselves. If they want a feature for their users, why depend on some little startup that may or may not fail? I don't think they're going out of their way to steal ideas. I think they are trying to maximize their own success. We could call it a lack of morals, but I think it's subjective which is why we have these debates.

Still, you probably should try to think about it from Facebook's perspective and be realistic about your position of leverage before you approach them with an idea.

but take my advice on this one. :-)

Why, on earth, should anyone listen to you?

Did you provide data? No. Did you provide facts? No. Do you have any kind of credibility whatsoever? No.

All you have is a pink blouse and a pathological case of Narcissistic Personality Disorder that you unfortunately feel obliged to broadcast in HD at the slightest opportunity.

And by the way, do you know what will happen when facebook/YC screws people over? The word will spread like wildfire. Because people have their own little voices around here. We don't need you and your pink blouse to save us.

And by the way, do you know what will happen when facebook/YC screws people over? The word will spread like wildfire.

Apparently the word doesn't spread to people like you, considering the long list of people Zuckerberg has screwed.

What makes you think I didn't notice that?

How could anyone miss that, given the steady influx of facebook stories esp. on HN?

So what did Jasons dramatic little speech add here?

Yea, fire is hot and facebook has probably no problem screwing you over when they get an opportunity. Say what, captain obvious!

Please, let's keep the discussion on HN civil, rational and lacking in ad hominem attacks.

Frankly, pg should not be dismissing his detractors' arguments as 'mere linkbait' if he wants to maintain a civil atmosphere on this forum. Not to say your direct parent was justified in his flaming, but our curator should have known better than to throw in that spark.

"Ad Hominem" <http://en.wikipedia.org/wiki/Ad_hominem>; is merely not an attack, it's a logically fallacious way of making an argument which the GP was not guilty of. Since the GP merely attacked the GGP but based no real argument on those attacks, what he did was a mere "personal attack."

Let's attack the issue, not the messenger.

Whose message is he delivering, aside from his own?

Linkbait or not, just because you don't plan to act against your own interests doesn't mean your actions won't break that way in the long run. Your heart is pretty clearly in the right place, but you're not good at hearing criticism.

The FB/YC thing looks like a net win for YC companies, but it's just not valid to say it isn't at all fraught.

It is important to consider Zuckerberg's history. Given his history of screwing over business partners and friends, it's almost a certainty it will happen. There is already a negative image of him in the startup community, so Facebook doesn't really lose much by stifling the growth of YC startups that he could argue would never have succeeded without Facebook.

The only question now is: what negative impact will this have on the startups? If you take a look at the recent squabble with Zynga and the introduction of credits, you'll see that Zuckerberg is bold enough demand 30% of revenue for a Paypal clone. Given Zuckerberg's history of changing policies like privacy for the worst, it wouldn't even be a surprise if he raised that to 50%. Would investing in YC startups be profitable if their valuations where cut by 50%? Would they even be worth that much knowing that Zuckerberg could clone it or demand even higher margins on a whim?

Instant personalization will likely see similar fees once YC is hooked on it. Though past performance is not an indication of future results, I have to say the future looks very bad for anyone embracing the Facebook ecosystem.

I think zuckerberg realized it when he looked at what the app store was charging, realized he was in a similar position and realized that it could work.

Facebook is not an investor like Sequoia, they have a primary business to run and there is some merit to Jason's warning, linkbait or not. How would you judge a year from now if this was a mistake? What criteria are you going to use to assess whether or not the deal met your goals?

I don't like Jason much, and I think his argument is unconvincing.

But when I heard of the YC/Facebook stuff it struck me immediately as a bad idea. It feels like a shift towards lock in. It's encouraging startups to build on a specific platform rather than supporting more open standards.

It also feels a lot like the idea that YC is aiming for the social "Facebook app" space; which, I agree, is a great (and fast) money spinner, but it's hardly revolutionary :)

Just my 2p.

I think calling it linkbait is dishonest to Jason. While he's known for such things, it looks like his genuine opinion on the deal, and not an attempt to get more [page]views.

You do have to keep in mind that Calacanis and YC are to some extent in competition, so it's not like he has no stake in making YC look bad and 'warning' potential YC applicants off like this means they'll have to go elsewhere.

Curious, how are we competition?

You know Open Angel Forum has funded YC startups, as have I personally. I love TechStars and YCombinator because they produce quality startups that I can potentially invest in, partner with or have on This Week in Startups.

There is nothing competitie between YC and JMC I can think of.

I'll take your word for it.

But it seems kind of weird to see you warn start-ups off from sharing their stuff with facebook through their YC hookup. After all, if the plan of this 'cooperation' would be such a negative for YC funded start-ups I would think that YC would pull out of such a cooperation in a heartbeat. It's not like they're stupid.

Give them the benefit of the doubt and see how it develops.

After all the risk to the YC reputation is considerable so you can take it as read that they've thought this through.

Well, I think the fact that YC has such a great reputation--including with me--is why it is concerning that they would give (or encourage startups to give), Facebook the keys to their kingdom.

It's really strange from what people are saying in the thread here (without speaking for anyone).

Another reason to not "see how it develops" is Zuckerberg's track record.

> Another reason to not "see how it develops" is Zuckerberg's track record.

You absolutely have a point there.

But still, for Zuckerberg to openly screw a YC backed company would be to screw YC as well.

And I find that hard to believe.

Doesn't mean that it is impossible, just implausible.

If it was profitable and strengthened Facebook I don't doubt Mark would feed off YC ingenuity without a moment of hesitation.

If you would try and screw your previous partners and your users, well, you would have not problem screwing over a tiny startup.

Zuckerberg's moral compass is set on "WIN."

Don't you think that their association with YC would protect them to some extent from trickery like this? After all, the collaboration with YC is widely published and it would get significant press as well as close a bunch of doors if he did something like that I would imagine?

All the other 'zucks' notwithstanding there has yet to be a clear cut case of fraud to come out of all this and I can't imagine YC et al would stand by idly if this happened to one of their investments.

He has a vendetta against Facebook and Zuckerberg. I think that's a far more overwhelming factor than any competitive feeling toward YC. My impression is that he's generally positive about YC itself.

While I think YC is way cooler than Facebook, I suspect from the perspective of Facebook YC is just a little ant below their feet. What incentive do they have to play fair with you?

From across the pond I am willing to assume that you are all really good friends in the valley and that things work out fine. But I also have to admit that Jason might at least have the hint of a point.

Or in other words - YC is about the only entity in this whole game that I personally trust. This is simply the reputation you have built. I don't trust Facebook.

On the other hand, it probably doesn't matter to FB at what stage they see a startup's idea. They'll clone it when it is successful.

Paul, Jason is right, because it happen to a company I was involved with a few years ago. Facebook was in it's early days (I am trying to be as vague here as possible because I do not want to give away who was involved), and they had a problem to solve that was getting worse as they grew quickly. This company had a solution - it had been developed by a small, but smart, team over a relatively short period of time (9-12 months) and was proven to work well with this companies customers.

Facebook called in a meeting with this company, and talked to them a lot about acquiring the company for Facebook stock. They offered the staff roles within Facebook, and the negotiations were well advanced. During due diligence, one of the tech guys sat down with one of the Facebook execs/engineers and described how the system worked, how some features were implemented and ideas they had for future features.

Not long after Facebook cut off all contact, ended up developing their own solution, ended up implementing a lot of these features, and ended up shafting this company. It is a shame that Facebook is so narrow in their thinking, because the execs at this company really could have helped Facebook avoid some of the troubles they had.

With due respect, pg:

The game of building a facebook dependent start-up has many possible outcomes but we could break them down this way:

1. Destined to lose. Nobody wins, not FB, not YC, not founders. All three parties joined in making a mistake. Oops. Boring case.

1a. Destined to win barely. Maybe YC finds a break-even exit. FB is incrementally helped. Maybe the founders are happy or maybe restless. Boring case.

2. Destined to win big by unique, non-replaceable opportunity. E.g., Founders have an exclusive contract with Bob Dylan and their product is going to go big... they can stay independent. They've got an "f.u." contract with Dylan. FB wins a little on the margins of the revenues of the new firm. YC and the founders win really big. The only problem is, such unique, exclusive opportunities are rare.

3. The start-up OR AN UPSTART COMPETITOR (most often Facebook itself or a better "friend of FB") will win big and it's winner take all. This is half of the case that has Jason Calacanis' panties twisted. FB can often (we presume, act as if we knew to be true) brute force the firm out of the market by replacement or force them into an early acquisition with the threat of replacement.

There are two sub-cases:

3a) Facebook's dominance as market-maker cum market-player is hostile towards YC and the start-up. FB wins. YC and founders essentially break even or worse.

3b) Facebook is in a cooperative mode (e.g., FB invests products and services in the YC firms and then dominates by friendly acquisition or similar). FB wins big - low stakes and high return on their perceived value as market maker. YC wins non-stellar but more reliable returns: a respectable interest rate on 20K outlays. That's a sweet spot for YC (they aren't playing the lottery, they're managing a fund). Founders get, in effect, a very modest bonus and then either a (likely crappy, per Jason) job or just a nice bullet point on their C.V.

Uncompressed, Jason has a reasonable concern I think. There's a new case where founders barely win and wonder if the struggle was worth it, while YC and FB are quite happy.

And, nobody asked, but I think YC's fundamental mistake is interest in funding FB-related start-ups at all. The problematics of letting one particularly odd firm create and dominate a market like that are such that I think YC should generally shun the unfathomable risks and complexities.

I see the deal as YC submitting a bit to FB's domineering tendencies because by submitting on these terms, YC does OK and the founders aren't creamed. A better solution (in my biased view) would have been to decide just to not fund anything that cares about FB's actions at all.


4) You build a win-big type company that is outside Facebook's area-of-expertise but leverages the advantage the Facebook's platform give you.

Takes games for example. Facebook itself doesn't seem interested in writing games for it's platform. Yes, it's true they want you to use their in-game currency, but that's just a platform tax, not competition against your business.

I suspect location-based-services are similar. I doubt Facebook wants to compete with the game-based mechanics Four Square is building. There is still a question as to if Facebook will go after the coupon market, though.

There are also businesses where you may be able to build traction on the Facebook platform, and then pivot off it if required.

I'm not sure exactly what you mean by your (4) that isn't already in my (2).

Assuming that your (4) really is something other than my (2) or a subset of my (2): how big do you think the opportunity of (4)s is, realistically, over the next 5-10 years, from an investor's perspective?

Maybe it's the same as your (2), or maybe Facebook makes more than a small amount from it.

In any case, I think it's a mistake that you dismissed this as The only problem is, such unique, exclusive opportunities are rare. Big winning companies are always rare, and there are always a lot more ways for them to fail than them to succeed.

I think it would be a big mistake to ignore the opportunities here and shun the unfathomable risks and complexities. There are always risks and complexities, and any kind of partnership increases the complexity. That shouldn't be something people should run away from, though.

How big do I think it is over the next 5-10 years, from an investor's perspective?

I think it could be huge. Zynga seems to be doing pretty well, as do all the other social app vendors (Slide etc). But there are a lot more opportunities than Zynga have covered, both in the gaming as well as the non gaming market.

What's your taken on Foursquare and Facebook's own entry into the same sorts of space? Could you write up something about competing with an incumbent who already has the captured audience effect going for them?

I think that the perception is that YC may be acting in its own interest but not in the interest of the founders. This is strange, because after all, once you are 'on board' anything that is good for YC is good for the founders.

Unless it is about increasing your 'batting average' by having a series of smaller but more-or-less guaranteed exits. In that case your goals would not be aligned.

That's a fallacy in the broad sense. I've had investors who had very different goals for my company than I did. Investors, YC included, are after liquidity events.. plain and simple. As a founder, that's not always the case (and the desired timeline is almost always drastically different).

In the YC case, as a relatively small (very) early stage investor... they might very well benefit from a lot of very quick exits. Before additional investor dollars and the resulting dilution that accompanies it. It's plausible that this deal with Facebook is designed to achieve that. Essentially giving Facebook early insight into these companies and that ability to pick them up for cheap ($2M-$10M), which might actually be advantageous for YC.

I'm not saying that's what is happening here. I really have no idea. I'm merely point out that Calcanais might have a strong point.

I think there are a lot more YC founders anxious to make a smaller exit than YC partners anxious to see small exits. IMO the problem of YC pushing companies to accept liquidity simply doesn't exit.

they might very well benefit from a lot of very quick exits

I fail to see how. Before they closed their Sequoia round, you could argue that smaller exits help YC keep afloat. With millions in the bank from outside funding, YC is beyond the point of trying to keep itself afloat.

That doesn't really make sense. A YC-backed exit that nets a "nice signing bonus" doesn't move the dials for YC, and the perception that YC is a farm team for Facebook and Google hiring doesn't help them either.

I don't know if this is what Calacanis is saying (I kind of doubt it), but the risk is that YC is acting against interests inadvertantly. And, again, probably not so much by Facebook stealing! your! ideas! so much as by creating a single locked-up railroad track for bizdev, putting FB at/near the center of a startup's solar system.

> A YC-backed exit that nets a "nice signing bonus" doesn't move the dials for YC

That's true, but it does increase the 'batting average', the number of 'successful' exits.

Personally I think VCs should only rate themselves by the number of companies they found that are big successes, not just the number that didn't tank.

But batting averages are used with some regularity to compare score.

I'm pretty sure there's a better-established rating system for VC's that doesn't take any of this silliness into account.


> I'm pretty sure there's a better-established rating system for VC's that doesn't take any of this silliness into account.

Total return on total investments?

For founders batting average is possibly more important than for the VCs themselves.

After all, a single spectacular ROI would make a VC that lost all but one investment look pretty good on paper.

I trust Zuckerberg to not steal my ideas - just like I trust Calacanas to not run a spammy bot created website!

In other words: It takes a rat to know one...

Sorry, I meant to downvote (not upvote) you.

That's fine. Care to explain your thoughts? Just curious.

Paul, how would it be linkbait as Jason already has enough of an audience..

I could see your claim if Jason was arguing up against someone with a dramatic more of an audience..however that s is not the case as both of you have about the same numbers in audience..

Not to say that you do not have some points.. just put in better form than the linkbait argument

Really?? A facebook acquisition is usually 5m - 10m, how is that against YC interest.

Didn't this exact thing happen with divvyshot? Facebook bought them, shutdown the company and had them working on image functions within the site.

From what it seemed they didn't get paid much since they were mostly after what the guys learned from the site. Meaning it sounded like they were just after talent and not technology or user base. Can't imagine that would be a multimillion dollar deal.


So it was an HR acquisition? Point me towards a big tech company that hasn't done an acquisition like this.

That's not exactly a trap though, is it now? After all I take it they did that deal willingly.

It's sad that this troll gets more upvotes here than the original announcement did.

Obviously every startup needs to be mindful of the potential for competition from larger, more established companies, but avoiding all the opportunities they create is even riskier.

If you want to be really sure that nobody ever "steals" your great idea, target an obscure platform (Linux desktop?), stay in stealth mode, blackout your windows, and keep all of your computers in a faraday cage. However, if you want to to build something that matters, you're going to have to take some risks and get a little closer to the fire.

I think that Jason says a lot of stuff to be sensational. He's building an audience of subscribers for his ThisWeekIn network of video podcasts. He's really good at thinking of sensational stuff to say in order to get people to look at what he's doing. "SEO Is Dead" comes to mind.

Jason could honestly feel that a company or two has received a lower valuation then they deserved, but isn't that the early stage VC game in a nutshell? Investors trade time for value - they invest early in something they think will succeed. In the end, early stage investing isn't a bad route for people to take. Sometimes, it's the best (or the only) way for a product to get off of the ground.

I strongly disagree with what he's saying, but I don't think that's a fair way of characterizing Calcanis. To me, it seems as though he trusts his gut instinct. Nothing wrong with that until you trust gut instinct at the expense of sound logic.

I'm not saying this haphazardly or even negatively. I'm not one to ever jump on the "bash Jason" train because I think that he is a smart guy working hard to figure out how to be successful.

However, one of his core strengths is talking. He knows what to say and when to say it and how in order to attract people. He is using this issue as a platform to reach his existing audience while attracting new people.

I'm not saying that he's right OR wrong about the issue itself. What I'm saying is that he uses topics like this as a platform to further his own influence. The proof is in the pudding... this is a hot story on HN and hundreds of new potential viewers have checked out the clip and likely the entire show.

Paul, Jason: I think Silicon Valley has a huge problem, and this whole Facebook / YCombinator thing is a symptom. Silicon Valley's problem is that it values only dollars and code. Silicon Valley has become a world where the hacker culture, lifestyle, behavior and attitudes are the norm - a world where gladiatorial combat in code has replaced the discipline of software engineering.

I understand what Jason is saying here...but to be honest, it's hard to tell someone that is used to living on $40k/year, that they shouldn't take an offer of $20M - that instantly makes them a millionaire.

Ofcourse, once you make that first sale and have the FU money to fall back on, it makes gambling (i.e. growing to IPO) much easier.

I am a little skeptical of Zuck too though.

$20mil from a company that isn't public yet isn't as good as it sounds. Who knows what the vesting terms are as well.

Yes, it's still a lot and there are ways to sell the stock but that's assuming they even get $20 million.

You say it's not 'as good as it sounds', it all depends on your perspective.

If you are earning $40k - $60k/year - which many young founders were likely earning before joining YC - even if after multiple dilutive rounds of financing you end up with 10% of the company, in a $20M exit....that's still $2M.

Sure, you can't buy Fiji....but you are literally going from a bank account with a few hundred/thousand/tens of thousands, to literally hundreds of thousands/millions.

That is VERY major the first time it happens.

I guess the point I am making is, the jump from having $10K in the bank to $1M in the bank, is SOOOO much bigger than from $1M to $100M - because it impacts your life much more.

Sure, but a sub-$2M sale for a company still in embryo stage is a very different proposition.

I would say like any other commentary on the web, consider the source!

Jason makes some good (if generic) points about any industry where large incumbents will try to absorb or nullify innovative competitors or startups.

Microsoft did it in the 90s and 2000s as well..

But we all know how much Jason hates Facebook, so he's using them as the bogeyman in this example, because, well, he hates Facebook!

Mapquest learned this the hard way when they got stomped by Google Maps.. If your product doesn't have built-in "hard to replicate" or proprietary features (or data), then a better-funded competitor can just buy their way past you by using more resources to replicate what you have.

Maps are an interesting example because map data is actually hard to replicate. Google went ahead and built their own database anyway, after several years of licensing from NavTeq and then Tele Atlas. http://blog.daveburrows.com/2009/10/08/google-drops-teleatla...

This allows Google to do whatever they like with the data, including offering turn by turn directions on Android.

I loosely know of Jason Calacanis and don't know what credibilty he has to base these statements on, but it he does raise any interesting point.

What precedent does Facebook have to support the 3rd party developer ecosystem on apps.facebook? /me points at http://developers.facebook.com/docs/api*.

I'd be really interested to see what other HNers have to say about what I think is the main issue: given you don't think becoming a facebook fte is your desired exit strategy, what would you do to protect your IP from Facebook?

It also depends on how a business uses the access to instant personalization. I would use it as a way to generate fast growth but also focus on segregating this growth from facebook reliance, as Zynga has done to an extent.

This way if the relationship remains good you can continue to reap the benefits, if it goes sour you have your own userbase with some separation from facebook.

It depends though, plenty of developers are happy to put all their eggs in the Apple app store basket because the benefit now outweighs to potential downside later. This would be the same here.

My reply: http://www.youtube.com/watch?v=goc4COUe1Z4

(I for one would much rather be stolen by Facebook than Mahalo.)

Social media start ups or otherwise, it is rarely about the idea, it is about the execution. If you cannot execute better than facebook you should probably consider selling to them, if you can no amount of idea stealing should prevent you from growing your start up.

And as part of the execution you guard against being locked in to a specific platform.

link to a more verbose opinion before and after the cut: http://www.youtube.com/watch?v=AWJAkjF9qnY#t=1h14m44s

Who cares who really said it, I saw the Techcrunch post on this and I had the same concern before seeing this. I think i posted - I hope Facebook doesn't ruin YC.

It's amazing what high production quality on audio and video does for credibility.

Not sure if we watched the same video, but what I just saw was a yuppie in a pink shirt, struggling so hard to project an image of self-importance that it's bordering on slapstick.

I think you missed the sarcasm tags on the GP.

product -> platform -> library -> standard library -> language -> OS -> FPGA -> ASIC -> SoC

"Reaching critical mass" [so customers identify you with the technology/idea] is one way to avoid this.

I didn't watch the video, did he mention his Tesla?

i think he did this to get some traffic for show.


Jason worked for Facebook

Did I miss something? Like they say, [citation needed].

I think I missed it too.

Yeah, that was what they call a joke. Albeit, a lame one.

> Also, how could I forget Jason worked for Facebook? Obviously he didn't enjoy his job.

I think you are mistaken here, when Calacanis said he was 'quitting facebook' he meant that he would close his account there, not that he handed in his resignation.

Damn it, that will teach me to make poor jokes. I just meant he has no real insight on whether or not the job will 'suck'

10M for Hot Potatoe...I thought that acquisitions' numbers were unconfirmed?

This is mostly Jason Calacanis doing linkbaiting.

I listened to a podcast where Jason was a guest not that many months ago (2-3 perhaps). He wasn't aware of the concept MVP ("minimum viable product") which kind of surprised me.

Sorry, don't remember the name of the podcast.

I'm sorry, but even on HN I feel it is appropriate to reply to this jackass with only two characters: FU [Edit: the downvotes be damned]

Try placing a higher value on your time and energy. If something isn't worth an upmod, how is it worth a comment?

Maybe it's just hat I believe those two characters represent an appropriate response to that king of linkbait? Two more characters come to mind: PC.

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