"In the weeks and months following Demo Day, those few who fail to attract enough interest must decide whether to begin a new company, find employment at Google or Facebook or persist and grow “organically” — an unsightly word in the valley of silicon."
Really? That's it? Get funding or go home?
Man. Those crazy entrepreneurs who persist and grow "organically." So unsightly.
Good article. As a yc alum who's idea(s) didn't succeed (yet), it's pretty much on point on a lot of things.
There is one thing factually wrong, or at least incomplete .. you don't get $100k (formerly $170k) for 7%. You get $11-20k for 2-10% plus $80k (formerly $150k) at an uncapped valuation. Usually that % will be low.
The fundamental epiphany of YC/pg is that that we are no where near the limit on the # of startups .. and that encouraging hackers to become entrepreneurs is a win-win for hackers, investors, users and the world in general. YC will (continue to) be incredibly successful as long as it remains faithful to this.
Also, never knew about pg's fear of flying .. very cool and inspiring thing to learn.
The tone and diction of the article really struck me as odd and unusual.
1. The heavy-handed metaphorical comparison of YC to a summer camp: "During that time, campers, or founders, have regular meetings with each of Y.C.’s counselors, or partners," "The director of this camp," " basketball-court-size dining hall,"
2. "The Y.C. term culminates with Demo Day, or D Day." N̶o̶ ̶o̶n̶e̶ ̶a̶c̶t̶u̶a̶l̶l̶y̶ ̶c̶a̶l̶l̶s̶ ̶i̶t̶ ̶D̶ ̶D̶a̶y̶.̶
3. "or persist and grow 'organically' — an unsightly word in the valley of silicon." - The correct word would be "bootstrap." - and it's a totally acceptable word in the tech circles I've been in.
EDIT: Ah, I stand corrected. I worked at a YC company in the past and I had never heard anyone (the YC founders I met) call Demo Day as D-Day. The snark is really uncalled for.
The tone of this article is in fact a little different than most of what's on HN - as are most articles from the NYTimes Magazine.
The magazine enjoys a much wider audience than most of the technology articles found here. Articles from the magazine are often framed as stories, following the path of individuals to show the purpose of the article. This also helps hold the attention of the reader through the article's longer length.
The embellishments you list out here are other tools the writer and editors use to appeal to the magazine's reader base.
I've never heard pg actually call it "dday"; I didn't even realize he'd used it in writing on demo day a lot. I honestly would have assumed a reference to WW2 or some kind of military attack if someone said "are you ready for D-Day?" even in a startup context, or maybe a reference to a specific company's launch day, not demo day (by which time most companies have launched)
All I'm saying is, you see the New York Times call YC Demo Day "D. Day" and then someone says they got it wrong because "nobody" calls it "D. Day" and your first response might be to go check that fact out, since that would be an extraordinarily weird mistake for them to make.
This article kind of reminds me of the stories bands and actors used to tell about hollywood. Moving somewhere, living cheap then hitting it big - albeit on a shorter timeframe.
"How can a company that earns no money be worth a billion dollars?" - Hotmail. Those who forget history are doomed to repeat it :)
I was explaining both the power law distribution and expected value, and somehow that all got mushed together into one quote, incorrectly unfortunately.
The power law part is why the contribution of the other 99 percent of outcomes to the expected value is close to 0.
If, for example, the distribution of outcomes was uniform between 0 and 100 billion, the startup would be worth 50 billion. Because the distribution roughly follows a power law, 1 billion is a better estimate.
Also nobody really has even a 1% chance at becoming a 100B company. There have been very few of those in human history, the odds are << 1% even for a top YC company.
You're forgetting that they are talking about the companies getting $1B valuations, not all startups. If you line up 100 companies that are Instagrams, Pinterests, Facebooks (when it was valued at $1B), etc, one of them getting to $100B can absolutely be a 1% chance.
Having made several angel investments, I can tell you my eyes kind of roll when I hear the billion dollar valuation. It's very apparent when a startup has taken the number 1 billion and then just divided it by the potential number of users for its particular product and then by 12 months to come up with the monthly cost of the service.
The last investment we made presented numbers that were far more modest, but we knew the team seemed highly capable and respected their honest assessment, so we went with it.
Do you mean TAM instead of valuation? That's a very strange way (if that's the only way) of defining a startup's valuation. Also, surely you wouldn't be angel investing in anything with a valuation anywhere near $1B, you'd never make any money.
Why did Teespring take $1.3M in funding if they were on pace to make $1M the following month? Why dilute your pool when your figure was just a month away (plus whatever else was saved)
Hi there - Walker from Teespring here. Both rdl and earbitscom are right. We took money to give ourselves the cushion we need to scale and aim big, and we raised it from people we believe can make a difference to our business.
I'm writing a follow up to my first blog post (wiwillia.com) where I'll get a little more into the details of why we chose to raise.
Revenue does not equal profit and they want to scale quickly. They may have only $150k in profit on $1M in revenue and want to run operations at $250k in monthly expenses.
They didn't take "dumb money" -- they took money from people who would both make it easier for them to grow and who would make it easier to either raise huge amounts of future money (for expansion) or to sell the company in the future.
Why are some investors losing interest in YC companies? It's not only noted in this article, but was also a topic of discussion after this past demo day. Is it because YC seems to be investing in less startups 'trying to hit the home run' like Airbnb, Dropbox, arguably Stripe now? To me, it's somewhat confusing because the companies are still solving pretty darn realistic problems and are doing so uniquely.
[edit] this comment was posted (somewhat so) in the hopes that one of the partners will respond with their thoughts and if they plan to address this and if so, how so?
Because whenever a reporter asks investors at Demo Day for a comment, and they ask themselves "what could I say that would be in my interest to have reprinted?" the obvious choice is "prices are coming down."
And it's not true, incidentally. We don't have all the data yet but it's clear valuations remained high last batch.
That doesn't sound like a compelling reason. If that's true now, that was at least as true before when the terms tended to be even worse for entrepreneurs. What's changed recently?
I don't want to agree but I do. If you had a job out of college and didn't squander your money (as we are assuming the existence of intelligence) bootstrapping a good idea together is very cheap. If they have been at it and the idea is good and solves critical mass problems and other start-up problems within it why should he/she/they go to a VC?
The current stage: VC's come in, or, like to come in when the startup appears to not even need them. If it is already growing, adding users and all thats needed to make that grow exponential is throwing cash at it they love to come in.
That doesn't pay for development. Even if you have a non-technical cofounder who can pitch in for the development when necessary, you're going to hit a point where it's not enough. And it's not so easy to sell people on joining your company for equity when salaries are so high at large companies.
Uh... the next big ideas aren't going to be the first thing out the door. If they are smart they would create something for passive income with low maintainability while working on the real product.
There is a meme where running a startup is like gambling where the only option is going all in, both for participating in the startup and for the ideas they execute. Quit huffing the glue, and pass the glue.
Uh...you clearly have never worked at a startup with a severe need for more developers. And I'm not talking about the next Instagram. There are legitimate needs for more developers in many startups that are working on real problems.
If you can accelerate the growth of your business by taking VC money and hiring more people, why wouldn't you? Contrary to your first statement, there are plenty of startups in markets that are currently in "landgrab" mode.
That makes no sense. By definition, if you can accelerate the growth of your business by hiring more people, then it is a case in which Brook's Law doesn't apply. It is a common misconception that Brook's Law applies to all software projects. It does not. I can think of several real situations where it does not.
"Growth of your business" is a particularly nebulous term in this (your?) equation, can you clarify how it applies in this context?
Is it possible you're identifying a follow-on effect where funding would allow a company to buy both headcount and time with which to get the new people up to speed? Making a late project later is only an observation, and speaks nothing to how hard or soft (invented) deadlines might be within a particular company.
The competitive aspect of demo day and investing in YC companies drives prices up. Investors are trying to maximize returns and some may feel these prices are not justified or that their capital can be put to better use investing in a company with similar results and a lower price tag. I do think this can be a mistake because the resources a YC company has at their disposal can increase their odds of success and create opportunities other companies will struggle to secure. I know that we have had more opportunities because of our YC status and that has made our company more valuable.
This is really great. I worked along side these guys (strikingly) in the same cafe in SF, hacking away for a while before they got into YC. These guys are humble and really doing it right.
They took what others just see as a clone of weebly and have added enough USP to prove that it's all execution. They had customers even while sitting in the little Cafe in SF and have growing fast through sheer force of will !
Biggest thing, humble, not afraid to ask for help and thick as thieves.
These guys are what every entrepreneur should be trying to attain in a team !
Spot on account of what pre demo day is like. Its been well over a year since demo day (W12), but reading that account was like reliving it all over as if it happened yesterday.
Amazing article! What I find particularly interesting in this is not that it highlights how awesome YC is and all that talk (I'm not saying that YC isn't awesome, I'm much inclined to believe that it is) but how startups offer a way for individuals to work with that they like more and how more and more people are embracing entrepreneurship and how technology plays such an important field in this.
It's doable but, as you would expect, it requires an extremely spartan lifestyle. I'm running about $500/month in SF and am no stranger couch surfing, lots of roommates, sleeping in my car, and (intelligently) fasting, etc. I could theoretically go even lower by purchasing lower quality food but I'm not willing to compromise my health.
Once you've seen the worst-scenario first-hand you realize it's not that bad, and you can shoot for the moon without any fear.
They mean $80k for YC VC ($20k each from Yuri Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital) plus the $14-20k from YC itself.
The ~$20k is for 7% (of common stock); the $80k is under START Note terms, essentially convertible debt which inherits the cap/discount of the next note you do. It's conceivable that just means an uncapped note, so adds onto your Series A.
Everyone is offered it; as far as I know everyone has always taken it. I got mine around early July of the summer batch; I assume it's roughly the same still. If you really needed it early I'm sure you could arrange that.
Guess this one looks like a post enthusiasm state but here is what I think is going on lately (Disclaimer: I am an entrepreneur, I feel this, so please take it all with a pinch of salt):
It seems that the race to get into a coveted program like YC has become crowded. Almost every other startup that I met during last one year (50 odd in two cycles) had applied to the YC program [premise-A], some gotten the interview [premise-B] and some gotten into the program [premise-C].
Role of premise - A: Crowded race makes way for best YC 'applications', and I have seen PG/YC liking the way the quality of applications have gone up. Sure. However, the quality of application does not necessarily reflect the quality of technology startup.
There are several areas where these two indices are not aligned perfectly:
For example, there are people who can write and tell really high quality stories, given the amount of time at hand, but they're the ones who should probably be doing literature and not technology startup (rant?). Then there are other have-nots: The statistical bias of past YC batches seem to be away from the relatively older entrepreneurs or heterogeneous teams. This leaves out a bunch of gems.
Long story short: A crowded race forces not-so-great start-ups to focus on getting into the program successfully and the great-ones to keep out/avoid/shy away and focus on building their business instead. And sometimes lose on what could have otherwise been a great partnership.
Then the process is in two batches. Great companies were not built in batches so there seems to be a process conflict. Someone who is feeling great about their startup in June-July would be depressed by December when winter applications reopen. Perhaps a rolling-in applications model [1]?
Role of premise - B: I know a couple of really awesome guys who went for their interviews and came back with a no. While there would have been genuine reasons, or simply bad luck, for these people getting rejected but I saw at least a few of them outgrowing their 'pariah' status and deciding to go for it and build it all by themselves. Cockroaches?
How should I put this? This situation is like a river flowing across the plains. The river-bed gives shape and path to the flowing water, but flowing water too, in the long run, gives shape to the river bed and alters its course.
Role of premise - C: There is role of who gets in, how many get in and how they do it. Given that the size of batches have gone up, I do believe that number of sentences exchanged with PG/partners per startup must have gone down. Or it is skewed between the white and black swans. And that could be a huge set-back for some. Make-or-break fluctuations are so tiny and yet so important. Even though this is a scalability challenge for an accelerator program like YC, but I guess there has to be a hard limit on how many are taken in. Which is bad because there is no limit on the number of applications though.
I guess writing more on this will take a lot of time. These are some of the thoughts which I am sure are well understood at the combinator. It's just an outside-in view from where I am coming from.
"Given that the size of batches have gone up, I do believe that number of sentences exchanged with PG/partners per startup must have gone down."
I didn't read this whole comment, but that part at least is false, because we've hired new partners at a higher rate than batches have grown. We now have 5 people doing for 50-startup batches what I used to do alone for 20-startup batches.
Looks like hn_id of monsterix has been banned. Didn't expect this from site admins because what he said above was within quality of discussions normally seen here, and his questions are genuine.
It's kind of sad that admins are unable to take criticism or face real questions and are overreacting to it.
I am pretty much back in. Yes, there was some problem last night and some of the lines I edited/wrote got lost when I hit submit. Couldn't login for a long time thereafter, and unfortunately misunderstood the situation.
The ability to communicate is a critical skill in any company.
If none of the founders at your startup can write at a basic, clear level - YC applications are no works of literature - and the founders cannot hold a conversation (that tjeu prepared for) in front of a camera (let alone a spontaneous real life conversation), then the founders have no business starting a company that one day might have 5, 10, 20, 50, 100, or 1000 employees.
It is a common misconception that introverts have some fear of holding conversations and give presentations. An introvert is merely someone who doesn't necessarily enjoy those things and for whom those activities are tiring.
Actually, introverts can be exceptionally comfortable on stage since they're not there to have conversations. This is often especially true of musicians, who can be very shy and retiring in daily life, and totally at ease in a spotlight with tens of thousands hanging on every note.
If you're bad at presentations, it's not because you're an introvert. It's because you don't know what you're doing. Holding a stage, as any well-practiced performer will tell you, takes attention, skill, and work. Talent helps, but that just makes it easier to develop what's essential: skill.
You wouldn't pay to hear a performer practice scales. Nor (generally speaking) would you pay to hear a performer who hasn't practiced scales. But disagreement about the cause of bad presentations aside, I fully agree; leading (as opposed to managing) an organization demands the ability to tell a story that can bring together a broad range of people and interests to make the thing work as a whole. And that's a skill so important it borders on an art.
True. Not all the points I am suggesting above would be correct. However, how would you (let's say you're running YC) separate a genuine technology startup with great communication skills from a fake one with great communication skills?
I think experience has shown that YC is pretty good at that by focusing on the problem the startup is trying to solve as well as understanding the founders well enough to know if they can solve it and exactly how they are going to solve it. Whereas some of the more spectacular startup failures of late have been from companies (like Color) that promise a revolutionary new thing but don't really have a basic problem statement written out.
Well, unless you lie on your application, your track record (whether it's your academic record, your work experience, things you've built, etc) should speak for itself.
Re: Premise A, a good application is not about "doing literature", it is about being able to describe clearly what you are building, why it is going to be a great business and why you are the right people to build it. It is harder than it looks and has to do more with how well you understand your business and less with writing skills.
Re: Premise B, there are plenty of people that get rejected at one point, keep going, and join later on. The Strikingly guys got rejected once.
I've wonder if the videos aren't a dangerous way to subject yourself to biases. It's well known for example that people judge attractive people more positively. The same probably goes for a good presentation style. Now I'm sure that being attractive or being a good presenter have some predictive value on startup success simply because everybody has these biases, also the people the startup will later make deals with or otherwise interact with. But assuming that the application judges have the same level of bias as the rest of us, since there are many other factors besides attractiveness or presentation style, the bias would be bigger than its predictive value. It would perhaps be an interesting experiment blank out the names of the applicants and to let half of the judges read a transcript of the video instead of watching the video itself, and see if the judgements are different.
It would be nice if people would put a tiny bit of effort into the video, specifically making sure the audio is intelligible (levels, lack of noise, etc.) on a normal computer. Just playing it back on a normal settings computer on internal speaker would probably be enough. Maybe don't shoot it in a car while driving, or outdoors with wind?
I agree with you, I'm not saying that the video can be low quality because it doesn't matter, just that the content is far more important to them, but yeah, I think is better if you have a proper camera and mic. Wouldn't leave a nice impression if someone submit a video shooted with their phone.
No one really cares about the video quality for this; a webcam is fine, and a phone is probably fine. And overproduced video is horrible. I'd just stick to making sure the audio can be easily understood, and making sure it is about a minute; if there is a lot of wasted time in the beginning, edit that out.
It seems (at least from your HN profile) that you're a founder, not a YC partner, but yet you're giving advice as if you have seen some of the videos that have been submitted by YC applicants. So I'm just curious now... are you or are you not a YC partner?
I'm not a partner at YC (as far as I know all the YC partners who were alumni were from fairly early batches, and also had exits; I have a YC funded company which is ongoing).
The relevant detail here is that I've had ~20-30 people/yr ask for advice on applications, and aside from "be concise and straightforward; emphasize your strengths in every answer; be clear and don't assume people will have the patience to decode some rhetorical trick", "wtf, I can't see your video because you left it as 'private'" and "I can't actually hear your audio" are common.
I think one of the whole point of YC is that it will make connections happen between those who can tell great stories, and those who can't but have great tech?
Really? That's it? Get funding or go home?
Man. Those crazy entrepreneurs who persist and grow "organically." So unsightly.