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.
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. :-)
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.
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.
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."
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 :)
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.
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.
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.
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.
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.
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
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.