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I Am Sam Altman, President of Y Combinator. AMA
634 points by sama on March 20, 2015 | hide | past | favorite | 689 comments
YC applications for the Summer 2015 batch are due in a week, so I thought I'd do an AMA to answer questions about applying to YC, how the program works, or anything else.

EDIT: 12:55 PM. This has been a really fun three hours, but now I have back to back meetings for the rest of the day. Sorry I couldn't answer everything--I typed as fast as I can :)

Special thanks to the YC software team for fixing an issue very quickly in the middle of this!




Question re solo founders: "A startup is too much work for one person" and if you can't convince even one friend to join you, that doesn't speak well for your idea! On the other hand, a bad hire/partnership can ruin the company. YC gives signal it really prefers to look at teams than individual applications. Q: Do you have have advice or rules of thumb re how much time a solo founder should put into finding partner(s)? Or thoughts re how much to prioritise this, vs. just writing code and talking to users to finish initial version yourself? I don't mean this to be just focused on "getting into YC" but more in general: what's the right way to think about fixing this problem (being a solo founder) vs tackling other things like actually building something initial users can be using? For software ideas surely it is occasionally sensible to make at least a prototype and actually get some users before ever buddying up? Or if I've got this far but am basically still going it alone, am I doing something wrong?


We really prefer at least two founders, but it's not a deal-breaker. We funded Drew Houston of Dropbox as a solo founder, but he got a cofounder before the batch started.

A bad cofounder is far, far worse than no cofounder.

I'd spend maybe 20% of your time looking for a cofounder, and the rest on your business. But don't force a cofounder if you don't have a good, organic option.

The more progress you make on the business, the easier it will be to get a great cofounder.


>The more progress you make on the business, the easier it will be to get a great cofounder.

I am not trying to be pedantic...but are they really a cofounder if you've hashed out the idea and made progress on the business prior to their involvement? It's an important question in my mind, because a cofounder typically receives far more equity than virtually anyone else that becomes involved with the business after it is founded, and it also carries legal ramifications.

I have personally been in a situation where I founded a company and created its technology, and when I needed money, someone volunteered to be my "cofounder". He eventually stole my IP, transferred it to a new corporate entity, sold it, and made more than $60 million. I wound up with nothing. While what he did was outright theft, I assisted him in it and made the legal battle infinitely more difficult for myself by declaring someone that clearly had nothing to do with founding the business a "cofounder" early on.


It would disqualify nearly all cofounders of famous startups if they had to form the company before one of them made progress on the idea. For example:

Steve Wozniak built the original Apple I attending Homebrew Computer Club meetings. Steve Jobs saw the prototype, realized it would be huge, and then talked Woz into founding a business around it.

Larry Page had started Google as a doctoral research project to download the web and make sense of its link structure. Sergey's original startup idea was to order pizza via fax machine, and he'd started work on it with some other friends before abandoning it to go work with Larry.

Mark Zuckerburg created FashMash and then Facebook and had some early traction among his house at Harvard before convincing his cofounders to join.

Drew Houston created DropBox as a solo founder and then convinced Arash to join after getting accepted to YC.

Apoorva Mehta started Instacart on his own and then got cofounders after YC.

The usual rule-of-thumb is to give close-to-even equity splits to cofounders here, because most of the work of building a company lies ahead of you, not behind you. You definitely do want to vet your cofounders for trustworthiness and have some idea whether they're interested in founding a company with you or whether they just want your idea. Usually the best defense to the latter is having something the former needs, either deep domain knowledge or technical skills or connections in the industry.


"Mark Zuckerburg created FashMash and then Facebook and had some early traction among his house at Harvard before convincing his cofounders to join."

I don't think it went down quite like that? I just can't let that little dude slip into history as the brilliant, modern day Jobs, or Gates. In my mind, he capitalized on someone else's idea--with the help of a lot of people, and got very lucky. Whenever I(under a pseudonym) use his site, I wonder why there isn't more competition. I sometimes think the very act of stealing someone's idea/site is the reason for Facebook's success? "I better not question that new hire--I'm not sure I even belong here? I was wrong on mobile? Maybe I should just follow their advice?"


Steve Jobs and Bill Gates also capitalized on someone else's idea. The "idea" is just one factor on a very complex equation.

Take a look at this great movie "Pirates of Silicon Valley"

http://en.wikipedia.org/wiki/Pirates_of_Silicon_Valley


Ideas aren't worth much. The real idea that Steve Jobs and Bill Gates had was that personal computers and software were compelling products that would have value to ordinary people.

I suggest you read the book "Hackers" by Stephen Levy (aside from probably giving more accurate insight into the origins of Microsoft and Apple, also includes timeshare, Unix, the free software movement, and IIRC Lisp Machines in its recounting, all in a lot less space than Isaacson's complete ballsup).

http://www.amazon.com/Hackers-Heroes-Computer-Revolution-Ann...


>You definitely do want to vet your cofounders for trustworthiness and have some idea whether they're interested in founding a company with you or whether they just want your idea.

This advice would have been handy for the Winkelvoss twins, who hired Zuckerberg to build their social network project. Instead he secretly held their project back while building his own version, including their ideas. The rest, as they say, is his story.


Why not use a vesting scheme.


Convincing arguments have been made that it's usually a better idea that co-founders get equal equity than not, to prevent arguments about said split which are much more likely to doom your startup. It's like that point about arguments in a relationship: would you rather be right or be together?

http://avc.com/2011/04/how-to-allocate-founder-and-employee-...

Edit: I see you added that second paragraph after I wrote this out. I'm sorry for your situation, that must've been horrible. However, it sounds like in that situation the toxicity of the co-founder is more to blame than any initial attribution or equity split.


Thanks for the link.

> The founders should end up with about 50% of the company, total. Each of the next five layers should end up with about 10% of the company, split equally among everyone in the layer.

This is the typical, and exploitative, arrangement in silicon valley! In today's climate, the founders often get money very early and start hiring right away. They have no real personal risk in the venture, and even if it fails completely their "founder" status will serve them well at the next go-round.

The founders had an idea and some rough prototype, but the product is built and the company direction is executed by the next 10 people, and the next 10, and so on. But while the first 10 Employees get to share 10 percent of the company, they sit side-by-side with the 3 founders who have 10-20 times as much as any one of them.

We all take it for granted that the founders' contribution should be worth so much more than mere employees. But who writes these blog posts on how to distribute equity, with 50% to founders and 10% to each "layer" after? Well, it's not the employees. It's the investors and founders themselves, who need to solidly stand behind the idea that at a company that faced failure every day and with every competitor launch and had to get every aspect right, in the end the people at the top should enjoy mega-riches and early retirement, while the lowly workers enjoy a nice bonus equivalent to a year or two salary.

----

If you believe in avc.com's guide of 50% to founders and 10% to each subsequent "layer", I would counter that the founding team is itself a layer, and each layer should be compensated equally. There is no justification for the first layer (founders) owning as much as the other layers combined.


If you believe it's exploitative, why not take the other side of the trade? Go become a startup founder yourself.

Lots and lots of people in Silicon Valley do that, and ultimately, that's what's causes market correction. If there are way more startups out there than talented engineers capable of building products, then the engineers can negotiate a much better deal for themselves. Or they don't and go out of business, but if that's the case, then your initial assumption that they have no real personal risk in the venture doesn't hold.

I know a senior engineer (Boston area, not Silicon Valley) that's made multiple millions multiple times as an early employee. She comes in to startups after they've fucked up their v1 so badly that they can't bring it to market, negotiates a very sweet equity package, fixes the product, and then cashes out when they IPO or get bought.


> Go become a startup founder yourself.

The issue isn't me. And, I might already be a founder. That's besides the point.

I'm happy for your friend. That's excellent, to be able to negotiate well. Most people don't. And most people are TOLD, repeatedly, that 1% is an "excellent" percent even as the earliest joining a company.

The word "exploitative" is as tricky today as in centuries past. If the employee doesn't want to work for peanuts, why not go somewhere else? The market will eventually correct, compensate everyone fairly (by some definition of "fair"), etc. Well, my argument is not that the market itself is broken, because employees enter them under free will. My point is that engineers (early and otherwise) should not accept that their contribution is worth so much less than the 2-3 people on top. This is especially true for the first engineer, who joins at 1% next to the founder at 40%, but it applies to every after as well.


I've been both a founder and an early employee. As an early employee, I always received a salary, and knew I could leave any time I felt like it. My level of risk was low, and I was perfectly happy with my equity knowing I had a nice upside without much downside at all.

As a founder, I haven't paid myself in months, and have commitments to my customers such that I 100% can't just shut things down and leave to do something else without killing a lot of relationships and getting a terrible reputation.

Of course, I can only speak to my own experience, but I'm satisfied with my amount of equity in both situations.


I've been a founder and an early employee as well. As a founder, you sign on for the bad times. As an early employee, I always got duped.

As an early employee, I've had to go without a paycheck on multiple occasions. I had to go without healthcare for several months even though I was told the company already had it in place.

Sure, I could leave anytime I wanted. But I would forfeit all my stock if I left. Even if I left because they stopped paying their engineers. Besides, the money was coming. Why leave now? They promise they will make it up.

I've been told that everyone in the company had to take a 20% salary reduction to keep things alive. I could have left then too. Again, forfeiting my shares. But again, I bore the downside of the business without anywhere near the potential upside.

The important part is that none of this was malicious. The founder just had no idea what he was doing, and thought they had to lie for the good of the company.

As an early employee, I hired people into both the companies I'm speaking about. I'll never do that again. I haven't ever done that again. I urge everyone to not be the first engineer.


As an employee you're limited by the quality of the C-suite.

If you swap equity for salary, it's important to understand that you're not gambling on the quality of the product or the idea, but on the quality and integrity of the people you're working for.

You probably won't have enough information to make a good decision about their quality and integrity until you've been working somewhere for a while.

But generally, if one promise doesn't work out, you have good reason to suspect others won't too.

Equity is really just a promise. So you should have a lot of evidence of reliability and integrity before you count on it.


I think you're quite right. I tend to feel that people want to do good, and make judgments based off that.

Since my early mistakes, I've started telling myself "You're not negotiating with the person across the table, you're negotiating with unknown parties and circumstances in the future".

That kind of removes the human element.


In all situations, you really have to look after yourself. If someone ever asks you to work without pay, they're asking you to up your risk. Demand more equity. The greater the risk, the greater a return you should get, otherwise you're making a bad investment.

Founders can be assholes. So can investors. Always look after yourself (and your team, if applicable). Too many assholes and horror stories not to be wary.


Ouch. This is terrible.


I help out as a mentor at an accelerator in upstate NY. Unfortunately, we see solo founders rushing to find a co-founder just to go through accelerator programs.

I wish your reply was shared widely with anyone applying to any accelerator anywhere...


(Most) accelerators are the problem here. They stack all the incentives on adding a cofounder no matter what, and none of those that I've closely known would stand behind the idea of "A bad cofounder is far, far worse than no cofounder." E.g. if your original cofounder leaves, they'll lay big penalties on you if you don't refill that seat immediately, even if it's bad for the company.

What investors tend to leave out here is a real incentive for them, as a class. It's far easier to fire a founder if there's two. If there's two, it's often easy to make them turn on each other if they want one forced out. Forcing one of 2 out tends to be much less frowned upon, than kicking out the sole founding CEO and replacing him with outside management. Having 2 cofounders is big leverage for keeping the founders in line.


I think of this concept as the 'cargo cult cofounder':

http://journal.dedasys.com/2015/03/20/the-cargo-cult-cofound...


Would love to get in contact with you regarding Upstate NY accelerators - my email address is my username at gmail.


If i join u


It seems like you really need to know the potential cofounder as a person, though, otherwise you won't be sure what they're like when stressed or making mistakes. Doesn't this limit it to people you already know fairly well?


Yes, you do. We always ask how long the cofounders have known each other.


In need of a cofounder? Join the club. Or rather a club, where you will get to meet new people and, if you choose the right kind of club, get to see them in a high pressure situation.


Sorry, my view is that a solo founder can be just fine. I'm a solo founder and believe I don't need and shouldn't want a co-founder.

Here's why: The bottleneck in my project is just cutting my way through bad documentation -- all the rest, especially the crucial, core, secret sauce, original applied math, technical part along with typing in the code itself and getting it into good shape, has been fast, fun, and easy.

A co-founder might be able to get Windows Server 2012 and SQL Server Enterprise Edition or some such installed and running quickly while I would have to do all the mud wrestling with wildly obscure and inaccurate documentation.

Okay, but I really should, as is commonly said, know my business and, thus, should get SQL Server running myself, take notes, etc.

And when I have good revenue, I will just call for paid support and get a tutorial, explanations for each step, corrections when the steps don't work, take notes again, etc. -- still no co-founder needed.

But, again as founder and 100% owner, I need to "know my business". So, no matter how obscure the Microsoft documentation is for, e.g., how to get a connection string for SQL Server (took a week of mud wrestling, in the dark -- with clear and correct documentation I could easily have done it in 10 minutes), it's just work -- mud wrestling in the dark with alligators and poisonous snakes while being treated to a barbed wire enema and an unanesthesized upper molar root canal procedure while being poked two dozen times with a red hot branding iron -- I have to do.

For a prototype or using lean development methodology, no thanks: I just wrote the darned code, wrote it as fully solid, production quality code, at least according to common standards for such code. I tested it, timed it, documented it. I was in a team at IBM that shipped IBM Program Product code (IBM's highest quality software category), and the code I've written for my startup looks as good as Program Product code to me. And I documented the heck out of the code because I know that if my startup works and becomes a big thing, then I will have to return to some parts of the code to put in tweaks for high scalability, e.g., for Web user session state, for a positive integer n, partition all the possible session state keys, each a GUID, into n partitions, have one session state server for each partition, and, then, in the server side code of a Web page, given a key, do a fast lookup to find the IP address of the session state server for that key -- simple code tweak, but, still, I want the code to be tweaked very well documented.

Net, for the crucial, core work, I don't want to delegate it. So, no need for a co-founder. So, no risk of any co-founder disputes. So, get rid of one of the worst risks for a startup.

If my startup works, then I will start to hire but not any co-founders. Instead, the first hire will be an office manager! She, likely a woman with a lot of social maturity and general business experience, will do the first interface to the phones, mail, e-mail, bookkeepers, accountants, lawyers, landlords, bank account, credit cards, expense accounts, the advertisers, billing, depositing checks, paying bills, record keeping, etc.

As that job grows, she can hire assistants. Eventually her work will be that of the COO, CFO, and HR. She would be a candidate for one of those slots or just remain as my assistant or something else.

Some of my work will become that of the CTO, e.g., run the server farm.

And in time I will want a staff, e.g., to come up with ideas, study issues, propose solutions, present their work in papers and talks, etc.

During the initial growth, I will be able to manage all that work because early on I will have done the first, small, beginning cases of all of it so know at least the first parts.

But, during the growth, no one hire, if they left, could sink the company. The only key person in the company will be me.

So, grow? Yes. Hire? Yes. Co-founder? No. E.g., I helped start FedEx, was right there, my office next to COB, CEO Fred Smith's. I saw a lot of how he did it and saved his company twice. He had no co-founder.

This stuff about co-founders looks like something equity investors want: It appears that they want (1) a ready source of a new CEO if they don't like the current CEO, (2) want the power of a solo founder as the unique, key player diluted, and (3) want to be able to have more control over the company via divide and conquer among the co-founders. No thanks.

The whole startup equity funding situation looks like very fishy business to me: So, clearly the way it works, nearly always, is, I do all the work to go from nothing to a product or service, with users or customers and revenue, and then someone with a term sheet and a checkbook might write me an equity check.

But, as a solo founder, it won't take much revenue to make my little sole proprietorship profitable, a life style business. E.g., at current ad rates, keeping a $2000 server at my left knee busy sending Web pages can get me by far the nicest income of my life.

Then, if the business is good, that is, lots of people on the Internet like my work, I'll have plenty of cash for organic growth without equity funding. If my business is not good, then I don't deserve equity funding anyway.

Basically as a solo founder, I can't get equity funding until after I don't need it.

But, I shouldn't much complain: US Main Street businesses, e.g., auto repair, restaurants, convenience stores, print shops, plumbers, electricians, HVAC companies, etc. don't get equity funding, and my information technology startup needs much less capex to start and opex to run than any of those Main Street businesses.

So, what startups get offered and take equity funding? Maybe a promising startup with four founders, each with a maxed out credit card and a pregnant wife? I only have a debit card, no credit cards. I don't have a pregnant wife, don't even have a wife. So, maybe I'm seeing more reason to be a solo founder.

> The more progress you make on the business, the easier it will be to get a great cofounder.

Yes, and the less I will need a co-founder!


I couldn't agree any more than I already do.


Awesome


Very helpful, cheers. "The more progress you make on the business, the easier it will be to get a great cofounder" -- agreed -- and being accepted to YC would itself more than help convince people to join the team also :) I hope there are more Drew Houstons out there with confidence to apply.


Thanks sama and mbym. As a confounded solo founder waiting for organic cofundity, this is nice to hear.


Parker Conrad of Zenefits was also still a solo founder in his application video. If a founder intends to add a co-founder before the batch starts, how much does that impact your view on them as a solo founder during the application process?


Parker and I spoke about a cofounder then. He was very receptive to adding one, and that helped his case.


Please don't let the lack of a cofounder discourage you from applying. It's definitely a huge help to have a good cofounder, but we accept great founders regardless. There's a tendency for people to want to reduce the world to black-and-white rules like, "yc doesn't accept single founders", but it simply isn't true. We are specifically looking for outliers, so any such rule would be a huge mistake (because the big hits are, by definition, exceptions).


Thank you for that! What makes you believe that someone or something is an outlier? How much of it is a gut feeling versus observable data, for example?


No two are the same, but generally a good sign is if they have outlier behavior in their past. For example, if you won a gold medal in the Olympics, there's a good chance that you would at least get an interview -- the level of determination and persistence required to accomplish something like that would definitely be helpful in founding a startup. (that said, I don't know that we've ever actually funded an Olympian) A more common example would be creating a popular open source project (e.g. the creator of Sails.js is in the current batch).


Just read your Wiki page. The quote under "Other interests" really resonates with me. A few blog posts of mine you might like - http://mattamyers.tumblr.com/post/78764544562/profit-has-no-... and http://mattamyers.tumblr.com/post/72715425291/capitalism-and... - I'd love to hear your thoughts here or on the posts. Thank you.


Hi Paul. I applied last time with a video with the team, however with updated rules (they own less than 10% each) then they're not supposed to be in application video; I started my company many years ago and small team relatively recently joined as relating to the equity. I don't have time to redo an application video, and with a comment on HN from someone at YC during last application process - applying early increased chances of being selected, meaning once startups selected for interview that the application process still remains open - the odds feel negligible. Any thoughts?


Thanks for clarifying, Paul. I feel this is the one disadvantage I have in my YC application; being a sole founder.


Seconded: statistics such as these:

https://news.ycombinator.com/item?id=77525

... seem to show that very successful sole founder stories do exist. But nearly everything from the YC orbit says "find a partner or you'll fail," etc.


I find it even in the case when two or more founders were involved in starting some of these most successful companies only one of the founders took the initiative in the very early days.

The truth is it only takes one person to start something. And once you build something that has or can have tremendous value people will just join you naturally.

There is no such thing as the perfect moment to start something. You just have to do it and keep doing it and things will happen.


I came here to ask the same question. I started working on an idea of my own and I have many friends who are very talented but none that really seem to want to commit to something risky and obviously I don't want to force someone to come if they are not interested in taking the risk with me.

This is the main reason my next application to YC will be solo but I am certainly open (and would prefer) a partner.


Make sure you are the person reaching out to the one that you pick, not the other way around.


Hi BinaryIdiot, I am free and available, I am a TernaryIdiot, we could make a team!


We may have some communication problems! ha


Hi BinaryIdiot!

I am also looking for a committed group of people to work on a start up with. Please reach out to me at leannesawyer2007@gmail.com.


I think you're still missing the importance of the cofounder. It's to demonstrate that you are able to convince at least one single person to join you on the journey. Running a startup is basically one continuous stream of persuasion. Persuading customers. Persuading recruits. Persuading investors. Persuading employees. Persuading investors. Persuading the media. Etc. Etc. Building product, while fun, is easy (in most cases). Being able to persuade lots of people to row your boat in the direction you want is singularly difficult. Until you persuade that one person to join your pursuit, it's extremely difficult to think you have the skills of persuasion necessary to carry out the nearly impossible task of starting a startup.


What if you've already convinced people/companies to buy your product/service? Do you think you still need a co-founder then?


in my opinion, after starting multiple failed companies and one that seems to be working so far, individual founders are the exception that prove the rule.

at the end of the day, it's just a ton of work. even very very hard working and smart people are not physically capable doing this much work on their own - in terms of actual output founding a company is like 6 or 7 fulltime jobs' worth of deliverables, shared by 2 or 3 founders.

if you're a single founder, i think you'd have to raise money very early and make some key hires quickly in order to succesfully do it. from what i can, that's usually the case with single founders who were previously part of an all-star founding team that had a good exit.


With you recently leading a round of investment for reddit, it seems you are quite optimistic about its success but as of late 2013 (and maybe now too), Reddit remains in red even after nearly a decade of its inception[1]. Reddit CEO once said, that ads are the reasons Digg failed[2], so I believe the site would be wary of using ads to the fullest.

How do you think Reddit would become profitable and would be able to sustain itself?

[1]: http://www.businessinsider.in/Reddit-CEO-Admits-Were-Still-I...

[2]: http://techcrunch.com/2012/11/08/reddit-digg/


I am an extremely patient investor. I just invested in a company that I believe will take 20-30 years to work.

If reddit gets to a billion users, which I believe it will, the company will have many, many interesting monetizations opportunities. It's on its way to become one of the great monopolies of the web.


> I just invested in a company that I believe will take 20-30 years to work.

How do you conceptualize investments on that sort of timescale?

20 years ago was 1995, and 30 years ago was 1985. So much has changed between then and now. I understand that broader market trends can sometimes be predicted, but when you invest, you're betting not only on a market trend but on a specific instantiation of that trend.

How do you conceptualize an investment in a specific team and company on that sort of a timescale, when there's already so much uncertainty around what markets will even exist in 2045?


Reddit is the meta-web. It is probably also flexible enough to be the backbone (aka platform) of other businesses in the future.


Yeah, just look at Reddit Gifts. I can totally see more stuff like that pop up.


Access to research prototypes?


> If reddit gets to a billion users

What makes this number significant? Can you talk about some of those opportunities that aren't available to reddit now, but will be when they reach that scale?


reddit has the potential to unlock a lot of value if niche subreddits can achieve critical mass. There are quite a few subreddits that could support highly targeted and valuable advertising. Comment and voting quality also appears to improve dramatically with scale; compare the quality of comments on default subs to niche subs. If niche subs can get that dramatic improvement in quality, reddit would also be able to attract much better demographics for commercial purposes


>Comment and voting quality also appears to improve dramatically with scale; compare the quality of comments on default subs to niche subs.

I hope you meant - worsen dramatically ... it's the reason I unsubbed from almost all the defaults.


See my reply to waterlesscloud for an explanation. There are some big problems in the defaults, particularly around political topics, however, these are not issues of scale. They are issues of diversity. Reddit will need to address the diversity issue in order to succeed.


In my experience, the comments on the niche subs are of considerably higher quality than the default subs. So much so that I'm puzzled what you could be thinking about. Can you give some examples?


It's basically a mathematical guarantee. Reddit shows 200 comments by default, so if there are 20k comments, then you are roughly getting the top 1% of comments. If there are fewer than 200 comments, you are getting ALL the comments, basically unfiltered. I've also noticed that the best users make a greater effort on comments that may be read by a large number of users (granted, the average user probably does not)

Voting quality clearly goes up with scale. On a small subreddit, you can make a brilliant comment, and only one person votes on it and you are at score 0. On default subs, the voting tends to be more accurate (though with a populist/groupthink bias)

I think some are confusing comment quality with comment value. A really funny, but silly joke would be a high quality, low value comment. The default subs tend to be lowest common denominator subjects, like "cute" stuff and politics -- low value. Whereas niche subreddits are highly focused on your particular passions and interests. Niche subreddits have greater value to users, which is why they are also more valuable for advertising and monetization purposes.

At sitewide scale, the quality of existing niche subreddits would improve dramatically, and smaller niches that do not exist today as subreddits would gain sufficient scale to support independent subreddits. I think that these niche subreddits could support almost search keyword-like targeting (albeit with lower CPMs because no immediate indication of intent). Imagine native feed advertising volume with keyword-like CPMs.

Not that it's highly relevant, but I'm a developer of a popular reddit app for iOS.


This explains quite a bit when it comes to YC tending to not give a fair shot to companies whose business model hinges on/around creating [a] niche community.

It occurred to me recently (before reading this comment) that the idea I applied to YC with would probably be very successful as a subreddit. Which of course would be great for Reddit ... because a growing company is a cannibalistic company. But if it _were_ a subreddit, I'd essentially be forced into volunteering on it full-time for an idea that was making Conde-Naste all the money. The critical mass of ~1 billion would for sure allow Advance P to throw its weight and influence just about anywhere... like any of the media conglomerates.

But I'm just not a fan of monopolies or any clustered niches operating under a corporate umbrella. Even one whose motives are supposedly as democratic as Reddit's.


> It's on its way to become one of the great monopolies of the web.

How is it a "monopoly"? Usenet was a "great monopoly" (with better UIs) before it died. So was Digg. Pseudonymous chat servers are a dime a dozen. When Reddit grows "interesting monetizations," people will just go elsewhere.


Why did Reddit's board appoint Ellen Pao as CEO when it was already known she had a high-profile gender discrimination lawsuit with Kleiner Perkins to deal with?

Many capable people could lead Reddit so why choose someone with highly visible distractions? For example, Ellen's husband has been accused of running a $140 million Ponzi scheme!

> "Users lash out at Reddit boss for ‘deleting’ posts on hubby’s lawsuit"

"Alphonse “Buddy” Fletcher ran a hedge fund, Fletcher International, that is now bankrupt. He owes millions in unpaid legal bills and tax liens and the bankruptcy trustee described it as a Ponzi scheme.

Fletcher still owns several apartments in the storied Dakota on Manhattan’s Upper West Side while his defunct fund owes more than $140 million in court judgments."

http://nypost.com/2015/03/18/users-lash-out-at-reddit-boss-f...


Also, if you don't use Alien Blue (the mobile app for Reddit) then you might not know they have been testing "Sponsored" posts. It didn't take a genius to know people would complain, but the ads are getting A LOT of pushback from users. I supposed you can put this in context and look at how Facebook gets crap for changing anything, but is this really the most creative idea Reddit can come up with to generate more revenue?


I don't use it (I just read reddit in mobile safari) but I will pass this along to the reddit team.


A LOT of pushback? That link in another comment is the only pushback I've ever seen, and I use Alien Blue (having purchased it). I haven't even noticed sponsored posts on the mobile version (I have on the desktop site though), and they hardly bother me. I've never seen anyone else seriously complain about them either. Sam, if you're passing along GolfyMcG's feedback, please pass along mine as well.

I run Ad Block, but reddit ads are the least of my worries. Maybe I just don't use reddit as seriously as some other people do.


Here's the current status of ads, as I understand it:

On iPhone, you only see sponsored posts if you have not purchased Pro. When they rolled out ads initially to iPhone, Pro users saw them and complained, Reddit said it was a bug, and fixed something on the backend to prevent them from being shown to Pro users.

On iPad, you see sponsored posts even if you have Pro. As far as anyone can tell, this is intentional.

From the first 10 posts on /r/AlienBlue:

----------------

How to: Refund Alien Blue after Sponsored Ads Decision

I paid for no ads!

Has anyone else gone back to the old app?

Why are they monetizing the app before it even works properly? They have to know what the userbase thinks of this...

No ads! No test ads, no real ads, NO ADS!


No, Alien Blue on iPad has not had a 'Pro' version in months.


Thanks for the correction. I don't have the iPad version myself, so I was going off of comments made by other users. It sounds like people who did pay for Pro when they did offer it in the iPad version are upset, then.


Yes - A LOT of pushback. I didn't purchase it, and I don't complain about the ads because I understand they have to make money. I do read the comments on them and they are exclusively sarcastic comments/complaints about the ads existing.

My complaint isn't about the ads existing - it's more a disappointment in Reddit/Alexis Ohanian/YCom/etc in not being able to produce a more interesting business model. There is always so much talk about being "thought leaders" and focusing on really game changing technologies. This is the opposite of that : /


Context: http://www.reddit.com/r/AlienBlue/comments/2znkjk/i_paid_for...


Or put it in context and see that people are pissed that bugs aren't fixed for months but instead you get ads now.


This answer by Adam D'Angelo on Quora blows my mind:

"What was hot in Silicon Valley in March 2013?"

http://www.quora.com/What-was-hot-in-Silicon-Valley-in-March...

Every one of those blew up.

So I ask you the same question:

What is hot in Silicon Valley in March, 2015?


Adam is super smart. In fact, I asked him for an updated list at dinner a couple of weeks ago and I predict he will be right again.

I'm not going to share my list because I've found that people put too much stock in it. I don't mind talking about things like nuclear energy or biotech, because people are either going to start those companies or not.

But I don't want to cause founders to start or stop working on specific idea because I say something like "I think enterprise software is great" and they really want to get into YC. I never used to worry about this, but I've since found it happens surprisingly often.

The best companies are usually started before any trend is obvious. By the time the trend is obvious, it's too late.


Enterprise software you say? interesting...


Honestly, I think the old list is still pretty accurate. If anything we might have just additions to that list - in 2-3 years I'm confident wearable will be big, and I think BLE devices have become more popular in the HW Startup space too.


So, your bet is on nuclear energy and biotech? ;)


0) Binary computing 1) Ternary computing ~ Quantum computing


1. Device powered health 2. Enterprise security 3. Streaming video


If you had applied now with Loopt, do you think you would have been accepted into YC? Or Alexis Ohanian / Steve Huffman with Reddit in its primordial phase? It seems like YC has become so competitive that it cuts out some of those promising (risky) founders that don't have as much to show.


On that note, would you ever consider starting a YC 'minor league' farm? It'd be interesting to do 12-15k investments on young, very scrappy founders, a la original Summer Founders Program. Perhaps mentored by alumni rather than full-time partners for bandwidth purposes.


Yes, I've thought about trying something like that.


I think so, yes. But also, it's a different time now. I'd have had more progress by the time I applied to YC.

For some companies, in a week, good hackers can get a prototype built and have a few initial users. If that's possible, we expect it.

If you are building a nuclear reactor we do not expect a prototype at interviews. However, we did have a rocket company bring a prototype engine to interviews.


Hey Sam, can you give please tell us about the time you, sama, most successfully hacked some (non-computer) system to your advantage?


Sure. When I was running my startup, we got catastrophic news that the first big customer in the space (Boost Mobile) was signing a deal with a competitor instead of with us. This would have killed us.

The competitor was a much larger and better funded company that had been around for years. I was a 20 year old CEO. Most big companies do not like to make risky decisions, so this was not entirely surprising.

We got this news at about 11 pm. The next morning at 6 am, I was on a flight to Orange County. I sat in the lobby until the guy responsible for the deal on their side walked in. He was polite but said the decision was made.

I convince him to look at our demo (in the past few days, we'd done some research to figure out exactly what features he really cared about). As soon as he saw it I knew we had a chance.

Ended up hanging around for about two weeks. Eventually, the other company overplayed their hand and we got the deal, and then the deals with every other major US telecom company.


Is this more hustling than hacking? I'm scratching my head and trying to figure out how it's a "hack", as in "beating the system" [1].

[1] http://www.paulgraham.com/gba.html


I'd consider it a hack. It was improvised in a short amount of time, and with limited resources. Sam shouldn't have gotten the deal, but he did! I'd say he beat the system. Which system? The Universe.


Straight hustlin'!


That sounds a bit creepy. How did you know which guy it was and what flight he will be taking? To track him like that seems creepy.


I think it means he (sama) took a flight to be at the guy's office first thing in the morning, to wait for the guy to show up at the office.


Sure, but it was necessary. I'd do it too if it meant my startup would survive.


And can you please tell us what you're hoping to discover about a founder with that question :)

Side question, mostly just for fun, have people's answers to that question ever been blatantly illegal?


One guy who got accepted answered that questions with "I sold drugs"


source?


Talked to him in person. No source.


Hello Sam,

First, thank you so much for taking the time to answer our questions.

My question is about confidentiality of applications. Today I am working at a YC startup. I (and two other friends) have a project in mind. But what prevents me from applying to YC is the fear that my application would fall in the inbox of our founders. Obviously I would prefer our application to remain confidential until if they we get accepted (which, I understand, is against the odds :)).

How can I ensure that this won't happen? How private and confidential are our conversations with YC partners and team?

I have also heard that YC alumni sometimes help filtering/interviewing the teams/projects that apply. Is this correct?

To be completely transparent, I have heard from 2 persons closed to YC that there is no way our founders won't know that I have applied. So this point really worries me a lot.

Thank you for your answer and again, thank you for taking the time to answer the questions of the HN community.


We do have some alumni help us review applications. There is a chance the founders of your startup would randomly see your application.

HOWEVER, you should not only start a startup if you get into YC. If you're into this startup, you should be doing it whether or not YC funds you. It's a big red flag for us when people only want to work on a startup if they get into YC.

Also, in general, if you're planning to start a startup at some point, talk to the founders of the startup you're currently working at. They'll generally be very understanding.


Anecdotally, I was rejected by YC and in the following year my startup has grossed over $100,000 and is acquiring new users at a stable 20%+ MoM. Point being YC is a nice-to-have, not a need to have.


Thank you Sam for your feedback. I totally agree: YC should not be the only reason for you to start what you want to build. And I had no pb submitting applications to other accelerators. That being said, YC is considered as the best of the best by many :)

In a nutshell, I guess the answer is no, it can not be confidential.

Thank you for your answer and time.


I may or may not of applied to YC before; I decided to tell all of YC founders working at the same company ahead of time for this reason. It can get at least a little complicated when some of them are managers... of people applying.

Most of the YC founders ended up helping us with the application, and it wasn't a big deal, but I fully understand this feeling.


Oh man, I'm in the same situation, and I was kinda trying to not think about it! I'd assumed YC applications were a "safe" place? (No?)


We were in the same situation. But we were completely open with our YC founders and they helped us a lot in getting into YC and with tons of advice. It seems like you are building the relation ship wrong based on some sort of deception. I would think about it.


Thank you treeform for your answer. I agree that if this would be possible this would be the best way to go.

Unfortunately all the founders are not the same, and mine are not opened AT ALL to these kind of initiatives :)


Without knowing much, this does come across as very hypocritical of them to do this to you. It seems like the type of attitude that would be frowned upon by the YC community.


This works OK when you have direct relationships with the YC Founders -- but when you are only tangentially connected in a big company... It is hard to know where rumors go.


You have suggested that Silicon Valley is successful, in part, because workers accept a notion of "long-term compensation" [1]. Long-term compensation, perhaps better called maybe-someday compensation, requires SV software engineers to work for relatively less (factoring in cost-of-living) than many other skilled professionals, with hopes that they'll be rewarded with a big windfall in the future.

With the rising cost of living in SF/SV, young engineers are expected to shoulder much the risk of startups while putting their long-term financial stability on the line. All in hopes of maybe-someday being compensated. And let's face it, the lion's share of these rewards will not be passed to these workers who put all their eggs in one basket, but to financially-secure VC's who have hedged their risk across many companies. If this is how SV works, do you truly believe this is a strong foundation for the industry? Obviously it's good for founders and VCs, but I'm considering the perspective of engineers.

We seem to be enjoying go-go years of investment and profits, everyone is starry eyed, and the system is working. What happens when the present-day strain on workers exceeds the allure of maybe-someday compensation? Also, why shouldn't talented workers move to an industry that provides guaranteed compensation for hard work in real time?

Of course, start-ups have a much different risk profile than banks, consulting agencies, large corporations, etc. And as a result, the long-term compensation model may be a necessity. But in the end, it sounds like SV works because there's a large supply of people willing to gamble on their future financial stability.

[1] http://blog.samaltman.com/why-silicon-valley-works


It's a personal choice for workers. If you're an engineer and you want a guaranteed $250k per year, go work for a financial firm. Nothing wrong with that decision. Everyone gets to make his or her own.

Engineers at startups make $100k+, sometimes much more. I don't think people are being asked to subject themselves to unreasonable financial strain.

It is indeed "maybe-someday" competition. When you work at a startup, you're acting like an investor but investing your time instead of your money. If you choose well, the upside can be pretty crazy.


> When you work at a startup, you're acting like an investor but investing your time instead of your money.

True, except: (a) An employee can probably only work for one startup at a time, and begins vesting after a year. That's like asking an investor to bet on at most 1 company per year. (b) Employers tend to give substantially less detailed information about their business, financials, etc to prospective employees than they give to investors. We have to make our choice very carefully, but we often have to make it with less information. (c) And after we've chosen, and vested, we do also have to invest money to exercise. If after that point things go downhill, we're out on money, but also years of our careers.


I forgot (d) "Real" investors in the same startups are often getting preferred shares while we get common shares.


If after that point things go downhill, we're out on money, but also years of our careers.

Maybe if you're thinking about a career in terms of building seniority over a long period of time at a single company. Working at a startup usually involves a good bit of responsibility and a diverse set of technologies compared to working at a larger company. It seems to me that's going to look good to most prospective employers.


Diversification only lowers risk. The expected value doesn't change.


Would you rather have a 1% chance at a billion dollars or a guaranteed million? The former has a 10x higher expected value but I think most people would choose the latter.


I love examples like this. My interpretation of this generally depends on an idea of "Expected Impact", where ex. the difference between $10^6 and $10^9 in terms of lifestyle impact can be smaller than the difference between $10^3 and $10^6. You could assume a logarithmic value function, for example, but each person might have a different function depending on what you would do with the money.

Not that people actually think that way, but you can construct a model where the guaranteed million is the rational choice.


What your talking about is commonly referred to in economics as diminishing marginal returns. The first $1000 is much more useful than the second. Also, your interpretation of "expected impact" is what we call economic utility, which is commonly put in a cobbs douglas utility function (utility = (some_number > 1)^(1 > some_number > 0).


Sir/Madam, that is incorrect. Diversification can easily lower expected value, or raise it. It should maximize your signal to noise ratio, if properly done.


I believe the definition they are using is something like: given a random process X for your percent return, if you invest in n nths of your money into iid copies of X, you will get the same expectation, but with smaller variance compared to putting it all into one copy of X. That's diversification.


You're using a different definition than the one I learned in school. The purpose of diversification, as opposed to simply picking the best asset, is to decrease variance.

Given a choice between two assets, or portfolios, one first maximizes expected value. Between two portfolios of equal expected value, you pick lower variance. That's the rational thing to do if you are managing a fund. The whole risk ratio thing arises only because so many investors are trying to build a well-diversified portfolio and bid up or down the price of assets accordingly. Price in turn affects expected return -- the expected value of the asset.


My point is simply that diversification results in a different expected return of the final portfolio. Before diversifying your expected return was R1 and after it will be R2 where R1 != R2. So, for choosing startup vs big co, or one startup vs another, this is relevant as well.


Given diminishing marginal utility of wealth, diversification increases expected utility, even if not expected wealth.


Everyone has a personal tolerance for risk. If you are diversified, then you decrease the risks that you are exposed to - possibly below your personal risk tolerance. That allows you to use leverage to increase your risk back up to your tolerance, which also increased your expected return.

So yes, diversification (plus leverage) absolutely increases expected value, if you hold risk a constant.


Which matters a lot if you only have one or two shots.


Regarding (b): I think an employee working day to day gets a much better picture than investors. It requires time on the job, but my point is that it's not as one-sided as you make seem.


But the employee has one massive advantage to the investor: the actual ability to influence the success of the company.


Investors have a lot more control over the board than a average employee will.


Startup boards have very little to do with the company's success. Key employees have much more impact.


Employees have more do with success. But if a big investor goes, we want this. Your probably going to do that.


You don't think giving a company money influences their success?


Not beyond the cash.


>Engineers at startups make $100k+, sometimes much more. I don't think people are being asked to subject themselves to unreasonable financial strain.

Is $100k enough for a person to live without roommates within 20-30 minutes commute from said startup? Eat healthy food? Pay student loans? Have health insurance and build savings?

I'm not from the Bay Area- this is a serious question.


I was making $100k and was able to find a small apartment in SF AND save about $2k a month (granted, I've finished paying my student loans). Not needing a car, and the ability to walk / scooter / public transport everywhere for relatively cheap, is a huge money saver! My half of the rent each month, as of today in SF, is $1300 ($2600 for the whole apartment in SoMa), but you need to take into account the money I'm not spending maintaining a car (which can be costly in the city, especially w/ parking).

As for health insurance, you'll more than likely find a job that offers that. I had great health insurance, the company had some neat perks like a gym membership, free lunch and dinner at the offices, and permission to work from home pretty frequently.

I think if you are anticipating $100k a year in SF, you'll do fine!


So you get a small, shared apartment, dinners at work, no car, and $2k/month left to save. Honestly, that's not bad, but I'm guessing you're young.

Consider you're slightly older and thinking of starting a family. Will your income cover: extra food and clothing for a child? day care or maternity leave? saving for college? saving for retirement? a larger apartment for your growing family? a down payment on a house or car? car payments or a mortgage? investment income? Is your company paying for your dinner because they expect you to work at night?

$100k in SF is a reasonable amount of money. But as your expenses begin to grow, you may wonder when your earnings will grow in proportion. Unfortunately, while many industries value their workers more as they grow in experience, the SV software industry has taken a unique stance that experience is actually a liability. Perhaps because the SV software industry runs on the notion of maybe-someday compensation, which is a palatable proposition mainly to the young and naïve.


> the SV software industry has taken a unique stance that experience is actually a liability

I see this viewpoint often, but it always seems to be from people who either haven't used their time wisely or otherwise don't want to change their role. There's a bizarre belief that they should be paid more for the same type/amount of work. Apart from a few situations, the marginal value of very good code over simply adequate code is very small...it's not enough to justify the marginal salary of a very senior coder over a junior coder. And yet people believe that since they've got 20+ years of experience, they should be paid significantly more than someone with 2+ years.

Meanwhile, those that have used their time wisely and moved from engineer into architects or other leadership positions are both older and very well compensated. We realize that we can guide a team of junior engineers to produce something that's good enough to meet the needs of the business. It's not as good as it would be if I wrote every line of code myself or with a team of engineers with 20+ years experience each, but I know that none of it is a disaster and it was written for a fraction of the cost. My salary/comp has more than kept pace with my expenses as they've grown, but only because my contribution to the organization has grown similarly. I could have never grown that contribution if I'd stayed in a role where I was primarily responsible for writing code.


You're correct that the marginal value of great code vs. good code is...marginal, MOST of the time. But I think the 1% cases are where the big (200k+) comp packages are for ICs. Stuff like perf optimizations at big scale, 1% adwords CTR improvements, optimizing JS runtimes, etc.

I agree that for most organizations management is the highest-leverage (ergo, highest-paid) path.

A better way to frame the problem is to think about the organization's economics and how your contribution fits into it. Figure out the 2-3 key metrics for success at the org and figure out whether you can move those, and if so, how. And realize that in a lot of job roles, you won't move the key metrics, and won't be paid as such.


At that point you'll have dual income so even easier.


Great points. And for the record, I guess I'm young. I'm single with no dependents. :P


It'd be cutting it close...but if you have no other debts I don't see why not. I suspect the biggest thing holding people back is that they have student loans and/or are not being offered $100k.

You can get a decent studio in the bay area for $2500 or so. If you don't have pets and you bike/pt everywhere then $100k is plenty.


Yes, though not if you live the lifestyle many engineers at startups choose to :)


I have lived very comfortably in Oakland for the last year on a ~100K salary. 30 min commute door to door, eat out a lot, travel, etc. With a quite nice 1bed apartment with a view.


I'm a Stanford graduate student. I earn about $30k per year, or $2,500 per month. Rent is about $1,000 per month. Food is about $200 per month. Taxes are about $300 month. So my three primary costs are $1,500 per month, leaving $1,000 per month in savings and discretionary spending. I'm flabbergasted that people think $100k is not enough money to live. It's way, way above the median wage here.


You can't do all these without roommates in San francisco (unless you have rent control pre 2011 or so) or Silicon Valley without roommates, but with roommates its manageable to a degree. Keep in mind "start up" can mean pretty radically different sizes with pretty radical mixes of base salary vs equity, later stage, bigger start ups (maybe more aptly, post product market fit, fast growing, privately held technology companies) can pay experienced engineers closer to $150k+ a year which even in an expensive area is a good amount of money. Even pretty small start ups tend to offer decent health care these days.


You probably won't be able to afford living without roommates. But the rest, is certainly feasible on a 100k+ salary.


Everything except the student loans, yes. If you have student loans you'd need to get a roommate (or two).

Source: I live in the Bay area, and got a job at bigco but a salary similar to 100k. Almost no education loans (under 5k), but about 40k of loans for parents back home. I paid it back in a year and a little bit more.


Apartments in SF now are $1800 / studio - $2200 / 1br. so...

  $100k:
  - $30k taxes
  - $24k rent
  - $12k food and misc
  -------------
  $34k
$34k is about what you have to play with for investing, transportation, entertainment, fitness, saving, student loans, other debt


1br is around $3,000 now: https://www.rentjungle.com/average-rent-in-san-francisco-ren...

100k = 25% marginal tax rate for Fed, but effective rate of 17.3% + 6.8% State tax rate = 24.13% = $24130 (assuming you are single)

  $100k:
  - $24.1k taxes
  - $36k rent
  - $12k food and misc
  -------------
  $27.9k
So you basically have $2,325 left over after expenses each month to play with.


Make sure to account for medicare and social security. That's an additional $10K-$15K in "expenses".


Good point, thanks!


Anyone working at a startup should be maxing out their retirement plan contributions: $18,000 for a 401k, $5,500 for an IRA.

They are a hedge against startup failure.


Thought process on this? If a person needs to dip into their retirement plan because a start up fails then they would be penalized, if that's the situation it's better to just keep it in cash.


The contributions to a Roth IRA (but not the investment returns) can be withdrawn with no tax penalty, so there isn't much reason not to max it out if possible.

Employees should always contribute to a their 401k at least up to the company match, as it is essentially free money.


If you're getting paid at SV salary levels, it's entirely possible you're making too much to be allowed to contribute to a Roth IRA.

Some IRA companies will let you do put it into a traditional IRA then do a Roth conversion, but then again some will make you mail them a notarized form every time you want to do that.


Please don't side track this thread with salary discussion in bay area. There are plenty of HN threads where this has been talked extensively.


Hey, "AMA" does mean "Ask Me Anything"


I interviewed for a company once that had different kinds of offers, ranging from low-salary/high-equity, to high-salary/low-equity. I thought that was an interesting idea :D They had 5 options total, and the middle option wasn't awful. I'd like to see more of this in the valley.


I always used to make offers like this--I think it's a good way to do it.


We do this, but use a sliding scale. The middle of the scale is what's locally considered to be a fair salary and fair equity compensation for whatever role we're hiring for. The equity / salary offered at each end of the scale tends to fluctuate depending on the impact of the role.

So far it's worked out well. I think potential hires like the flexibility because it lets them optimize for larger short term gain (a higher salary) or a potentially larger long term gain (more equity if the company sells, IPOs, etc.)

Anecdotally it tends to make negotiations easier for us. We basically end up presenting the entire solution space we're willing to offer for the ''what's my salary and equity'' problem. With the extents known, negotiations tend to settle around some point within that solution space. Your mileage, of course, may vary, though.


I wonder with these arrangements, is there any pressure or implied pressure on people to accept a larger equity amount? Similar to the issue with unlimited vacation time.


The one time I got that kind of offer, I got a lot of pressure from the hiring manager to take the most equity possible. They basically insinuated that doing otherwise was disloyal -- although, they cloaked the message in a super-positive tone, saying something like, "we are always really stoked when new hires choose the most equity possible because they believe in the mission". I know those words might sound squishy but trust me, there was no ambiguity about what they meant.

In retrospect I wish I had taken the higher salary.


Any specifics on the amount of equity offered? That's an interesting concept.


I don't remember specific numbers (this was over a year ago) but I imagine it would change depending on the startup. I remember thinking the offers were fair.


I've heard of saying: "Valuing options at $x/share, we'll give you $y divided however you want between equity and salary."


Couldn't it be more accurate to position this as follows?

"At a funded startup, a VC is investing money expecting a 30+% annual return. One condition of your employment is to invest along side of them via less cash compensation. If you can't take the risk, or don't believe in the upside, other places are better."


How senior is this guy who makes 100K? Is that out of college or 5/10 years? How tough is the competition?

I appreciate YMMV, but I'm asking on behalf of my brother, who is graduating Columbia CS soon. We've got family in the SF area, so it might be a good choice for him to head over that way.


If he's a good interviewee, did summer internships, and got decent grades, he should be able to land something in that range. There's some competition, but for the reasons I stated ($100K goes a long way almost everywhere except SF, due to the very high cost of living), SF companies covet recent CS grads who work very hard and don't have many expenses (kids, car, house, etc.). It would probably be great experience and exposure for him though, and worth it while he's young.


Great. I'll make him post next time there's a hiring thread.


You're missing a key reason why annual salaries are modest at the beginning. A key attribute of a founding team is intense resourcefulness and have considerable powers of persuasion. Both of these attributes result in lower salaries initially.


I guess my concern is how salaries grow with experience, in a place with cost of living comparable to or higher than Manhattan.

A software engineer, a management consultant, a white shoe lawyer, and a banker may all start out at a "modest" $100k-$125k salary. Maybe a bit lower, maybe a bit higher.

But in only one of those professions is there a fairly low ceiling for salary growth and a tacit belief that your value decreases with age and belief (or, at least, a tacit belief that younger workers can do "good enough" work with lower pay and longer hours). The consequences of this are why having engineers go all in on a startup with hopes of delayed compensation is a huge ask.

Again, people are happy to do it, so it's not Sam's problem. It's certainly not my problem. But this system has grown dependent on a continuous stream high-profile IPOs making the gamblers rich, drawing in new and optimistic workers to take their place. If that stream dries up, I won't want to be anywhere near SF/SV during the fallout.


What is your advice for people who don't have co-founder material friends (mostly non-technical/non-sales people, or conservative) and are out of college? I've experience starting companies with acquaintances, something that, predictably, didn't go so well.

Is there any alternative - that you have seen in YC - to getting new friends, getting to know them really well, and starting a company in a few years time?


I have a good answer for this! Go work at a breakout medium sized tech company (i.e. a couple of hundred to a couple of thousand people).

You'll meet lots of potential cofounders. The people that are attracted to these companies are usually 1) really good and 2) interested in starting a company down the line.


I'd also add to this that you should be getting a decent base salary at a company at this phase and you should try and live below your means, both so you can save and have a cushion allowing you to work full time without outside funding and so that when you do the burn rate on that cushion is smaller.


This is my plan B and it's heartening to hear you share this view.


I'm heading off to B-school later this year. It'll be relatively cheap for me (non-US location) and I got into the top school in the country. Would this be a good place to meet founders, because I have the same dilemma as you - too many friends who are not interested in building businesses.


Excellent idea.


Since you probably can't spend too much time on each YC application, what is the most common issue you see that causes companies to not get further attention?


Great question! The biggest mistake founders make is burying whatever it is that's exceptional about them or their company deep in the application.

We are optimists. We want to believe. Help us by putting whatever it is that is going to make us want to fund you early in the answer to each question.

Also, be concise.


Do you think that YC could ever invest or advise startups / founders that can't move to silicon valley for 3 months for one reason or another?

Is there something inherent in the in-person experience that cannot be overcome by technology (in general too i suppose, rather than just the type of work ycombinator does)?

Personally i believe we're not quite there yet. I have some hope, that within our life time communication and collaboration tools can become both sophisticated and intuitive enough to make physical presence for most type of work completely irrelevant)


There is for sure something about in-person interaction that cannot be replaced by any current technology. Alan Kay recently told me he thinks it's something biological.

Our model just doesn't work well for people that can't move to the valley for 3 months.

Remote work is good in many cases, but early-stage startup advising is not one of them.


Thank you for taking the time to answer :)

I have no doubt its biological, but biological processes are inherent to any human activity and are ultimately based on physics as well. Consider even just the absurd number of extremely complex biological processes involved in typing a reply as we essentially communicate telepathically thousands of miles apart right now.

I'm daydreaming about having a captivating discussion with you and Alan Kay in which I manage to convince both of you to help me replace current technology with something that would change this and the world with it.

Any advice on how to make that happen?

I'm leaning towards "stop daydreaming and get to work building it" being the best advice toward that end myself...but then there is all the other things I need to get done as well.

:P


There's evidence that babies acquire phonemes when "taught" in-person differently than via video: http://www.ted.com/talks/patricia_kuhl_the_linguistic_genius... (this topic starts at about 7m08s)


wow, very awesome link. As someone who grew up in Germany, speaking Danish at home, then moved to the US when I turned 19 to go to college, and is now getting to watch my 2 pre-schoolers learn absolute insane amounts of things in such short timespans this definitely resonated!

In a lot of ways, startups are like parenting I guess. Certainly parenting is another example of an activity that depends absolutely on physical presence :P


I frequently see the stat that YC companies are worth 30 billion in total. While this is very impressive, it's still less than say Uber at 40 billion for a single company that's about the median age of the group--so it seems like a fair comparison, though an obvious outlier.

For the Uber, Twitter, Facebook, Google, etc. outlier startups, how much pure luck do you think plays into their success? AirBnB and Dropbox are YC's biggest outliers. Have you found any actionable patterns in the way the founders of these outliers work/think/operate compared with the more moderately successfully and unsuccessful founders?


We haven't updated our numbers in awhile. Current total is more than Uber.

We'll update again at some point.

It's not a perfect correlation, but the founders that build huge companies are extremely determined and smart, they have a very clear vision, they see things other people miss, etc etc.

That said, there is definitely a luck multiplier for the humongous companies. You cannot have a clear plan to build a $200B company.


It may go without saying, but potential market has a lot to do with it as well.

A company like Uber is entering a huge transportation market; Airbnb a huge lodging market. They can be big fish in big ponds. I think there are lots of YC companies in smaller ponds.


Only those with the very wildest imaginations (which happened to include PG and the founders) realized that Airbnb was entering a huge lodging market. Most thought it was just dumb to think many people would want to stay in other people's apartments. See http://paulgraham.com/airbnb.html


Ah. This is better phrasing of what I was trying to ask with my 10,000X return question.


Hi Sam,

Not a YC-specific question, but I was wondering what advice you have for someone who lives outside of a major technology center and doesn't have the ability to move? I'm eager to get something started here in the next year but I'm pretty much on my own, thanks!


I have a slack channel I'm growing that's open to all aspiring developers and entrepreneurs to eventually solve this exact problem. Check this page for more info, http://www.openmindedinnovations.com/about. Just email me at jbhatab@gmail.com if you're interested :).


This is 2015 - clearly it's not possible to found a company without living in a tech hub ;)


Not much it seems. :)


What are your thoughts on teams applying pre-product (but in development) with an experienced/diverse team compared to teams with product/initial traction? Do you weigh them differently during application reviews?


It's hard to give a standard answer to this--it depends entirely on the specifics of each case.


Thanks for doing this AMA Sam.

As a follow-up, what would you recommend applicants who are in this position do before the end of next week to increase their chances of being interviewed/accepted? (i.e. get feedback from as many YC alum as possible, iterate on their video, etc). Obviously without specifics, I'm sure your answer may be similar to the above, but any general recommendations here?


Talk to users, and tell us what you learn from them.


Thanks for doing this AMA anything Sam.

As a follow-up, what would you recommend applicants who are in this position do before the end of next week to increase their chances of being interviewed/accepted? (i.e. get feedback from as many YC alum as possible, iterate on their video, etc). Obviously without specifics, I'm sure your answer may be similar to the above, but any general recommendations here?


The average yc founder in this batch is about 30, but the average college/university graduate is much younger than that. What did a successful 30 yr old applicant do for those 8ish years after graduating?


What game can I play?


Possibly naive question:

I'm a married guy in his 30s working at a major investment bank in NYC (lead quantitative role). I have a graduate degree from a non-elite school. No experience at top tech firms (had offers but didn't go).

Now, I have some cool side projects that I believe could become great consumer apps given enough care and resources. Is there any reason for me to apply to YC, and any chance of getting seed funding from you, or am I completely out of your profile for typical candidates / startups?


I'm mid-30s. Dangerously close to upper-30s. Married. Two kids. Non-elite school. No graduate degree. I was in the YC Summer 2013 batch. I wasn't an outlier.

The one thing all YC founders have in common is that we are all incredibly determined. Creating a company is easier than ever but still basically impossible.


We have funded lots of people with similar backgrounds.

What will matter is the quality of your idea and progress so far.


Does YC consider the potential of bad press to itself when funding a company? If a founder were to apply with a startup such as Bad Dragon (dildo manufacturer), abortion clinic-specific software platform, wikileaks-esque platform, or any other such controversial idea, would it reduce the founder's chance of being accepted?

Are there any startups that have been funded by YC that led to publicity fallout?


What's something common that partners have to repeat over and over until founders 'get it' ?


The most common thing is getting founders to focus on the right thing. At this stage, nothing but building a product that users love matters. Founders want to focus on anything else, and have wonderfully detailed excuses for why whatever it is is so important.

"Write code and talk to users" is not sexy, but it's the road to success. Seeing your name in the press is sexy, but unfortunately has nothing to do whatsoever with actual success.

There is no shortcut for the hard work of building a great product.


One thing my company struggled with in ImagineK12 was attracting enough users to know if we were making something they loved - how can founders focus on both?


Did you try talking to the customers you already had, or folks who did not sign up but were in the same demographics?

I'm currently building a tool for writers and emailing writers individually (sometimes, even buying 30 minutes of their time) and talking to them has been really insightful.


It sounds pretty sexy in the startup class [0].

[0]https://www.youtube.com/watch?v=sz_LgBAGYyo


YC is famous for funding startups at a very early stage, even at a pre-traction stage, which seems to contradict the popular knowledge that an idea without a good execution is worth nothing. With just an application form and a 10 minute interview, how can you tell if the founders will be able to execute the idea properly? What are the most important traits that you look for in an application from a very early stage startup?


Even if the company is only a few weeks old, we look for signs that the founders are determined, getting things done week by week, and improving quickly.

If it's just an idea, then we look at what the founders have done in the past. Most people don't magically start doing great things for the first time when they start a startup.


When you held Startup class in NYC. You brought up a few founders who were invested in... and what struck me was that each of them had previous relationships to their investors.

For example I heard at least twice from an investor: "I've known john for years prior to him coming to me with [insert company name here]."

So my question is, do you think there exists a "good ol boy's club" in SV that increases the chances by a great deal of getting funded? Or do you believe the playing field is even for those who don't have those kind of connections?


For sure it helps to get to know investors over long periods of time.

However, the investors that invested in my company knew me for 45 minutes (YC), a few weeks (Sequoia), and a few months (NEA).

It's important as a founder not to make excuses for yourself. Sure, it's easier to get money if you've known investors for a long time, but it's certainly possible to get it without knowing them for awhile.

In YC's specific case, we don't know the great majority of the people we fund at all.


In terms of "How will you make money", are you interested in the market for the initial product/use case or what we think the product can eventually grow into?

ie: We think our total initial market has the potential to be around $30M/yr but can grow to take on other use cases.


Both. The best answer is something like "we have a path to be be doing enough revenue to cover our expenses in a year, but if things really work, here is how we could make $1B a year in 10 years."


I think it was a bad idea to write the best answer here :)


The important part of the answer is "here is how".


How was your meal at Delifina the other night? Just kidding :)

I don't really have a question, but my girlfriend and I were seated next to you and I wanted to introduce myself and thank you for your insights, writing, and contributions to the startup community, but didn't want to disturb your meal. Now I have an opportunity. Thanks!


Delicious. One of my favorite restaurants in SF!


Could you comment on why start ups with remote teams anecdotally do poorly but many open source projects with very remote teams succeed? Do you see any tools on the horizon to help people coordinate remotely at a new level?


I think it's because startups have to make small changes to their idea several times per day. Very short cycle times do best with in-person interaction.


Most closed-source products have very different management styles than open-source products.

If you're interested in the topic, check out the book "The Cathedral and the Bazaar" - it talks at length about the different styles of building products (Cathedral generally being closed-source stuff, while Bazaar is generally open-source)


If the product is good and if the product has a single co-founder, what are the chances of getting accepted?

The reason is that I live in a place where it's very hard to find a good co-founder and I don't want to team up with the only options that I have. I don't want to make wrong choices. In my place, people tend to join companies and look for jobs rather than start companies.


We will fund a company with 1 founder, but the bar is very high.

Have you thought about working at a startup first as a way to meet potential cofounders?


Thanks Sam. Yes. I have worked in a startup for few years. I made very good friends, some technical and some management.

I found a good guy who is on the management side, I asked him whether he is interested in startup. He is just married, from a middle class family and he is not willing to take any risk.

I also know technical people. Unfortunately I did not find good people on technical side but they are very talented. When I say good, I mean honest people.


How do you feel about what the constant influx of 22-year-olds making six-figure salaries is doing to the culture and social fabric of San Francisco?


I think the biggest problem is that it's making housing totally unaffordable. I think it's critical SF fix this, and that the only real solution is more supply.

Unfortunately, homeowners are the ones that vote, and they are loving the increase in home values and don't want to see a lot more supply get built.


The supply can't just be produced out of the blue. There isn't enough land in San Francisco to build a whole bunch of housing. The key is to expand out of city or create zones in city for affordable housing.


There's plenty of land if you build vertically instead of flat. There's a bunch of 2-4 story buildings that could be 10-20+ story buildings.


Right but this is not China, we need to follow guidelines as bay area is earthquake prone.


Earthquake concerns are a red herring, the lack of height is entirely self-inflicted. We know how to build tall buildings safely, but choose not to


The second tallest structure in the world (the Tokyo Skytree[1]) is in Tokyo, which is even more earthquake prone than the Bay Area[2].

[1] http://en.wikipedia.org/wiki/Tokyo_Skytree

[2] http://www.fastcoexist.com/3017696/the-cities-most-at-risk-t...


Or the opposite -- get rid of zoning restrictions. Laissez-faire.


How do you factor in possible technological advancements that could render a company's business model obsolete?

For example, if someone develops a distributed web-of-trust/payment platform, a lot of the value of Uber and Airbnb goes away.

The basic model behind some of these sharing companies can be factored out into (network effects + domain knowledge + web of trust) = profitable monopoly. You can adjust how valuable you consider each of these, but to me it seems like most of the value isn't in the domain knowledge area. What if someone figures out a way to not have all of the value captured by a monolithic entity?


We are a bootstrapped ~2.5yr old company that is doing $5M in Revenue and ~$2M in PBT. We have fallen into a bit of a funk in the past 6-12M or so growth-wise and basically flat-lined. We are talking to a few funds to raise a ~$10M round (mostly secondary) to bring the PBT down to 0 and really swing for the fences. We've thought about applying to YC but the 7% seems high for us at this stage. Is YC interested in co-investing the standard YC amount in such a round at the market valuation instead of standard YC valuation?


Unfortunately we don't do that--it just doesn't fit our model. Plenty of companies have done YC at a later stage and still thought we increased their value far more than the 7% we take, though.


I'd be more concerned with whether YC would invest in a company whose growth had flatlined: http://www.paulgraham.com/growth.html, with that said if you're making that much revenue I think there's likely other good options for you. Best of luck!


sama said they don't do that but they actually did do exactly that with Quora. I guess they made an exception.


What's the most exciting non-traditional segment (bio, energy, manufacturing, etc) you're looking forward to funding startups in?


I imagine each partner will have different answers. One thing I say is that we should be willing to fund anything that could be a $10B company, and that is such a difficult restriction we shouldn't have any other restriction.

Personally, I am very interested in nuclear energy and solar (I think energy is the highest-impact single thing to fix--it's remarkable how many other problems reduce to the energy problem), biotech, AI, education, healthcare, and online communities.

Interestingly, those first three categories are also where I think the biggest dangers to humanity are. High-risk high-reward, I guess.


What do you think about wind energy? A leading wind energy company here in India just had a $160M IPO here and it was oversubscribed. Wind is also growing faster than solar in large parts of the world.


Hello Sam,

Amid a never-ending war between anti-AI and pro-AI , you've recently shown strong positions( http://blog.samaltman.com/machine-intelligence-part-1) about it.

As an 'AI applicant', I can't stop wondering whether such position could influence an application decision.

What's your take on it?


I still want to fund a lot of AI companies.


Hey. This may sound like an unusual question, but I thought I'd ask.

We started our company about 4 years ago. Since then our apps have been downloaded by 3 million people in over 100 countries (see http://qbix.com/blog/ ) Every year we've been applying to YC, and never even making it to the interview. I know that YC likes to invest in teams and the ideas sometimes change ... and as far as teams go, I think we've done some impressive things. (For example, http://qbix.com/about) So I would think that at least we'd get a chance to be invited. We applied about 4-5 times in the last 4 years. The weirdest thing is that most of the times the founder video didn't get any views on YouTube (we tracked it).

Could it be that YC just gets so many applications that they don't really have time to go through them all, and watch all the videos?

Does it make sense to apply again? Are we blacklisted for some reason?

Sorry for being so blunt, but we really do like YC and we were just curious because there's very little feedback as to what goes on in the application process.


can you send me an email?


Sure, sent!

sama@ right ?


Hey Sam,

I'm working on this idea on my free time but for now it's in an early stage. We believe strongly in it but we don't have yet a ready prototype which means we don't have any structure, users, revenue, etc..

I'm wondering if YCombinator's goal is to encourage people from initial concept or help existent startups to grow and go further ? Knowing our story, do you honestly think we have a chance at this time to be selected by YCombinator ?

Thanks.


Why don't you have a prototype? That'll be an important question.

That said, we make most of our money backing companies at the "initial concept" stage, so we'd love to hear from you.


We're working on a prototype but it takes time and having a full-time job limits our commitment and progress. It's good to know because being funded will literally help to be focused on this idea.


There are a number of questions on here about remote/non-US/non-SV startups, and whether there is any place in YC for these.

Based upon my experience in the 90s running a DFJ funded startup which was located in Florida, I completely understand why YC would not want to try to do startup advising non-locally. Some things are hard enough to explain or understand even when you are there in person.

That said, YC also has the HN community, which includes many non-local founders and potential founders. For many of these founders, the YC value proposition may not meet their needs. This might be because of YC requirements (3 months, $/equity ratio) or because of Silicon Valley issues (I hear the rent may be too high). Either way, YC has an audience of potential founders which its primary product is currently not addressing.

Although YC is not lacking for applications, there seems to also be a case of unmet demand here. Do you have any prospective plans which would interest the non-SV HNer? HN is a network that seems to have some value to those of us in the hinterland, but perhaps this network of people could offer value back to YC as more than just interlocutors?


Would you or any other YC partners consider making a trip out to Georgia Tech to give a talk? We don't get too much love being in the south east, but there are many hundreds of talented engineering students here that would benefit greatly from hearing about YC and the startup world in general.


Yes! Please! Georgia Tech is a fantastic, underrated school with extremely hardworking, determined students.


Do you think if Zuck applied to YC today with Facebook as it was in 2005 he'd make it in? (Assuming the 'social network' landscape still looked like it had in 2005).


Yes. There are certain people that you cannot sit across from and let yourself not invest. He is one of them, for sure. He also had great growth.

(Zuck comes to speak to the YC batch every year or so. PG used to say that when he talked to Zuck he'd find himself saying "whoa, we should really fund this guy". I had the same experience last time he came to YC.)


https://www.youtube.com/watch?v=MGsalg2f9js&t=7m40s


What's something he said or did to cause the 'whoa' reaction? Any kind of anecdote you can share?


Watch the Startup School video on Youtube. It's when he talks about what he built before/parallel to The Facebook (Wirehog, Synapse, ZuckNet, etc.)


For the lazy, here's the link[0] where Mark talks about building a site that got students to upload their notes that helped him pass an exam for a course he hadn't studied for.

PG remarked that this was fitting answer for the "Tell us how you hacked a system" question in the YC application and added he has to constantly remind himself its too late to accept Mark into YC.

https://www.youtube.com/watch?v=MGsalg2f9js?t=6m10s


There's some very interesting things in that video. It set me to thinking about things Facebook isn't actually doing that Zuckerburg says he cares about. Which are things worthy of some further thinking to see what opportunities exist there...


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