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The 99% (of startups)
- voynich61 11y ago"I was successful even though there was a long time that I thought I wouldn't be all that successful, and I've gotten to where I am because I believed in myself." I paraphrase, but Poe's Law is in full effect here.
- pizza 11y agoBut what about respecting the Principle of Charity [0]? Once we do, then we shouldn't we also apply the Precautionary Principle [1]? We find that, if we do, then what the OP prescribes (lead, not silver, bullets) is hardly worth questioning, since otherwise we are claiming there are hidden risks of hard work (which, to be fair, do exist; burnout et. al are not pleasant to deal with in reality). I think that we can agree this (that we should not strive to work hard, especially after rejection) is harder to accept. [0] https://en.wikipedia.org/wiki/Principle_of_charity https://en.wikipedia.org/wiki/Principle_of_charity [1] https://en.wikipedia.org/wiki/Precautionary_principle https://en.wikipedia.org/wiki/Precautionary_principle
- yoshizar 11y agoI disagree with your interpretation. I think Justin is saying, "If the fundamentals of your business are good, believe in the data even when investors don't recognize its value. Eventually, they will."
- hakcermani 11y ago“Watching people play video games is a niche” is now “I’m in charge of our consumer, marketplace and esports investing.” Fuck them. Build your business. Thank You Justin, just what I needed today !
- feverishaaron 11y agoThese investors aren't paying enough attention to their children / their colleague's children. I would think that this guy's fame would have made this market opportunity super-obvious. https://en.wikipedia.org/wiki/Joseph_Garrett https://en.wikipedia.org/wiki/Joseph_Garrett With his own personalized collection of Minecraft toys and all: http://amzn.to/1O4VQNi http://amzn.to/1O4VQNi
- minimaxir 11y agoThere's a big difference between YouTube fame and Twitch fame. Counterintuitively, there's actually little overlap. Relaively few YouTube gaming celebrities stream due to quality control. Twitch celebrity streamers use YouTube primariy to host stream highlights as Twitch's VODs are not convenient. Notably, YouTube Gaming, which was YouTube's Twitch competitor, failed miserably since there was no clear advantage to switching from Twitch (among UI/Content ID/monetization issues) I know many YouTube gaming celebrities who have become successful enough for merchandizing, but not any Twitch celebrities. They're separate markets.
- feverishaaron 11y agoI don't disagree. I used Stampy Cat to make the market point, because there were hints that the "alright, let's play this game" spectator video was going to be a big thing, even before Twitch was Twitch. This guy has been operating since Minecraft was in it's infancy, and he had a large following before Twitch was a big thing.
- zillionize 11y ago"There is a tremendous amount of excitement about the top 1% of startups, but there are hundreds if not thousands more startups that will make their founders and investors rich." I cannot agree more with Justin and we have had several investment cases like that.
- huhtenberg 11y agoWhat an odd comment. Reads like a spam for "zillionize".
- huhtenberg 11y ago(Parent has edited the comment now)
- deleted 11y ago[deleted]
- Animats 11y agoIt's depressing that Amazon paid four times as much for this business as Bezos did for the Washington Post.
- Jasber 11y ago27 million people watched the League of Legends world championship[1] which is on par (or better) than MLB & NBA championships. It's pretty clear eSports is going to be huge. Having the biggest streaming site/brand will be valuable and doesn't seem crazy in that perspective. [1] http://espn.go.com/espn/story/_/page/instantawesome-leagueoflegends-141201/league-legends-championships-watched-more-people-nba-finals-world-series-clinchers http://espn.go.com/espn/story/_/page/instantawesome-leagueof...
- coldtea 11y ago>27 million people watched the League of Legends world championship[1] which is on par (or better) than MLB & NBA championships. That's part of what's depressing.
- sehr 11y agoWhy would that be depressing?
- coldtea 11y agoWell, for people upholding certain cultural values like me, which are not exactly too far-fetched, it's pretty obvious why an era where people watch live gaming in droves is depressing when contrasted with the decline of journalism. I'd rather there was a citizenry that read the Washington Post more than watching others play video games (or NFL or whatever) more. Maybe people would have a better handle of politics, and the economy and what's going on around them.
- asveikau 11y agoHow much do you read the Washington Post? Personally, I wouldn't put it on a pedestal. Take this example from a quick Google search (admittedly it's a partisan source) http://www.thenation.com/article/eleven-years-how-washington-post-helped-give-us-iraq-war/ http://www.thenation.com/article/eleven-years-how-washington... Personally, as a DC native now living far away, I think a citizenry reading WaPo seems like a frightening bunch of conformists. Yes I am aware of what they did in the 70s. Different paper now.
- joefkelley 11y agoI kind of don't understand this post. Surely Twitch is an example of the 1%, not the 99%? Not that I disagree with the end sentiment - I'm currently at a startup that was acquired as part of the 99%, but I don't think this is the most effective person to be saying this.
- indlebe 11y agoTwitch is surely an example of the 1% now, but he's saying that you may not be at that point yet and still have a great startup, regardless of what you are valued at, at this moment.
- brandnewlow 11y agoRight. He's saying that Twitch is a 1%-er now, but even 9 months before their deal they were in the 99%, aka VCs are clueless sometimes.
- jacquesm 11y agoNo, it is simply very hard to make the call.
- Alex3917 11y agoSometimes it's hard to make the call. Sometimes VCs are just stupid.
- deleted 11y ago[deleted]
- oaktowner 11y agoWhat's interesting is that they had already raised $42M at that point (according to comments here). Certainly raising $42M and having an over-$100M valuation already put them in the top 1%, right?
- CPLX 11y agoWhat the hell is he talking about? Is the summary of that article something like "this one VC didn't buy shares from me but then I got rich so fuck the haters 99% of you are going to be rich too" or something? The article is like a word salad.
- jaz46 11y agoJustin is saying that VCs understand what's hot now, but are sometimes bad a predicting future value. So to founders, if you're creating value, keep going even if VCs don't see the light yet. They'll come around.
- minimaxir 11y agoThe haters-gonna-hate philosophy in Silicon Valley is starting to become a problem. There's a lot of luck involved in making a startup, and startups can fail for any number of reasons that no data can predict. The notion that if you do your best, you will succeed, is dangerous to naive entrepreneurs.
- maxmcd 11y agoThe parent article contains this line: > "trust your numbers and growth to give yourself confidence in the face of rejection" I don't imagine the people that you're worried about this being dangerous for can always find comfort in their numbers and growth.
- kamaal 11y ago>>The notion that if you do your best, you will succeed, is dangerous to naive entrepreneurs. That is dangerous to any naive person in the world in any area of work. Doing your best, means your boss will look at you like a threat that you might take their job, or some political cartel in a big company will treat you like a pawn who does all their work, while their yes men reap benefits. Start ups are only a area of work where the heart burn is amplified because of a lot of work is done in a very short period of time.
- moistgorilla 11y ago
- api 11y ago"I tried to sell some of my startup shares for below what the market turned out to be willing to pay for them, but people said no because it wasn't trendy and it sort of hurt my feelings, but then I got rich so haha!" I feel really sorry for you bro. If you want some consolation you're free to PM me and we can totally hang out and you can buy me a house.
- raylan_givens 11y agoI really don't think that was the message he was trying to convey. If anything, he was trying to inspire other startups/founders that feel unappreciated/underestimated.
- jacquesm 11y agoThat's the most clear use of 'fuck you money' that I've ever seen.
- ryporter 11y agoAt the time he attempted to sell his shares, Twitch had raised $42 million, and had been valued at around $100 million several months earlier [1]. He is complaining about the gall of VCs not to buy his shares at a price that would imply a valuation of less than $194 million (and presumably not that far below). I do not believe that this is a good attitude for entrepreneurs to internalize. [1] https://www.pehub.com/2014/08/amazon-pays-970-mln-for-twitch-nearly-10x-last-vc-valuation/ https://www.pehub.com/2014/08/amazon-pays-970-mln-for-twitch...
- thethimble 11y agoHis sentiment is worth much more than the raw numbers. Raising a round is a very very hard thing to do. As an entrepreneur, you look around and all you see are the 1% in the media. On the other hand, the fundraise feels like you go door to door getting your idea shot down by everyone you talk to. The passion and tenacity to fight through this negativity is what Justin is trying to elicit.
- jacquesm 11y agoNo, that's not why no deal happened. I suspect it was because he was not raising money but because he was selling some of his own shares. In other words: he was trying to take some money of the table. And those are very hard deals to close. This is the key line: > I tried to sell some of my shares in a secondary transaction at less than a fifth of that price – and I was turned down by every VC I asked. So, he eventually actually made more on those shares, about 80% more and lucked out. But there is no way of knowing what would have happened in an alternatively universe where some VC would have bought a chunk of stock from Justin. Maybe then this deal would have never happened. You don't get to play twice, but it's nice that it all worked out so well for him.
- pcl 11y agoabout 80% more Correction: at least 5x more. Also: obviously I don't know the full context about this particular deal, but it always seems a little sleazy to me when still-involved founders sell in a secondary without making that deal available to the rest of the owners.
- noname123 11y agoWould love to see a series of good curves: (1) of all startup's started by people who working in the industry, quit FT jobs to do startup or put in serious moonlighting hours in startup; total earnings - opportunity cost, annualized: (total income from startup - opportunity cost of hours worked on startup) / years spent Maybe this data-set should be split further into bins of founders whose last title prior to startup were only individual contributors, or were executives, their age and pedigree etc. Would love to see the distribution + standard deviation say, for computer programmer who quits the job to do a startup would gain or lose in earnings per year. (2) of funded all startup; the alpha of investment: total return on investment - (S&P500 Index return in duration of funding to IPO/exit) / (S&P Index Return) Maybe this data-set should be split further into bins of people involved: founders, first 10 percentile employees by join date, second 50 percentile employees and so forth... Would love to see the distribution of return on investing in startup's as an investor vs. investing in S&P500.
- jacquesm 11y agoI think that would make for very depressing reading. It would be comparable to making a documentary about everybody who ever played the lottery. For the most part you'll see people that lost. Year after year after year. And then there would be the lottery winners. A couple of them. The middle is quite narrow, it's good money for a relatively large number of people but it is still a very small fraction of the total number that 'went for it'. Still, better to try and fail than never to have tried, worst case you'll learn more in 3 years than you'd otherwise learn in your whole career.
- smt88 11y agoThank you for being (seemingly) the only person on HN who understands that startups are a lottery. A very, very expensive lottery.
- jay_kyburz 11y agoI think everybody knows it, but "you've got to be in it to win it".
- srameshc 11y agoWhy the hell is this so negative ? He is very clear "This is for all the founders who know they have built something that people want, but the rest of the world hasn’t recognized it yet." It must be tough as a founder to prove yourself and others that there is an certain value to his/her business. Isn't a good exit is what an investor's or founder's option ?
- dang 11y agoFortunately, for such founders, Hacker News negativity is a rounding error. Edit: it's not so great for Hacker News though.
- ThomPete 11y agoOr to paraphrase Horowitz. Building a startup is hard. You will have to stand up to a lot of people who will tell you everything you are doing wrong. If you care a lot about social signals you probably shouldn't be an entrepreneur.
- incepted 11y ago> "This is for all the founders who know they have built something that people want, but the rest of the world hasn’t recognized it yet." So... 100% of the founders.
- arikrak 11y ago90-99% of startups fail[1], which should be mentioned in a post with that title. [1] See e.g. https://s3.amazonaws.com/startupcompass-public/StartupGenomeReport2_Why_Startups_Fail_v2.pdf https://s3.amazonaws.com/startupcompass-public/StartupGenome...
- perryh2 11y agoFor those that don't know, Justin's new app The Drop is pretty cool. It's like reddit for EDM. https://thedrop.club https://thedrop.club
- rajacombinator 11y agoNice. Sadly it's super rare to see anyone who's made it deviate from the script and share authentically like this. I suspect this is more a case of "VCs colluding against founders" than "VCs being too dumb." When you have a legit $100 mil valuation, SOMEONE will buy those shares, unless you're blocked from selling.
- downandout 11y agoThis gives an interesting glimpse into the prognostication abilities of supposedly brilliant VC's. It also shows the the near-impossibility of cashing in private company shares, at least through VC's. In addition to this story, the Sony hack revealed that Evan Spiegel of Snapchat wanted to cash in about $40 million worth of shares just after he spurned Facebook's $3 billion offer. He was also roundly rejected. Had someone bought those shares, they would have been worth around $200 million today. So anyone thinking that they're going to get much liquidity as a private company founder should think again. If the Snapchat and Twitch guys were rejected, the odds are not good that you will be the exception.
- coffeemug 11y ago> This gives an interesting glimpse into the prognostication abilities of supposedly brilliant VC's. The question isn't whether VCs are brilliant according to some absolute metric. The question is whether they deploy capital better than random chance. The numbers show that top ten VCs consistently do.
- fweespeech 11y ago> The question isn't whether VCs are brilliant according to some absolute metric. The question is whether they deploy capital better than random chance. The numbers show that top ten VCs consistently do. Does it? If you have enough gamblers in a high stake casino where the house hasn't stacked the deck, some of them will seem to consistently win in comparison to the other players. Similarly, a very small percentage of VCs and other active investors consistently beat the market. A percentage so small I'm not sure anyone can statistically say they are doing so through skill. Similarly, your argument is the top 10 are consistent. Yes. And the top 10 aren't a statistically significant sample in a market of thousands of investors.
- coffeemug 11y agoThis analysis breaks down if the top ten outperform the market after you've started watching them. If that's the case (which for top ten VCs it is), the math suggests it isn't a "million quarters" situation.
- angryasian 11y agoI'm unaware of the timeline but I'm curious was he trying to sell shares in JTV or did twitch eventually spin off to a separate corporate entity from JTV. It makes a huge difference because JTV was a huge liability nightmare.
- antoniuschan99 11y agoTl Dr: About Twitch.tv - “Watching people play video games is a niche” is now “I’m in charge of our consumer, marketplace and esports investing.” Fuck them. Build your business. Makes sense :)
- deleted 11y ago[deleted]
- free2rhyme214 11y agoI love Justin Kan's writing. If you read this Justin keep writing more man!
- xiaoma 11y agoThe interesting question to me is if Twitch would have done as well if he hadn't gotten rejected 9 months earlier. Unfortunately we can't spin up another universe, alter that one variable and run a test.
- deleted 11y ago[deleted]
- lepunk 11y ago"...but there are hundreds if not thousands more startups that will make their founders and investors rich." I think the correct word here would be "richer". For VCs 5x return on an investment while desirable, it's not the ideal outcome. Consider a VC invests in 100 companies during X years, $1 million each. Ballparking here but 80 of these will be a total failure. 19 of them will make 5x return. That is -$100 million spent and $95 million gained. So if the last one is "only" a 5x return the VC gets their money back (-inflation, time spent, etc). Thats why they are looking mostly for Ubers and AirBnbs imho
- sangnoir 11y ago> Ballparking here but 80 of these will be a total failure Would those 80 still have failed if the mindset was "get 5x returns" rather than the current "get 100x - 1000x returns"? My gut says the demand for high-returns results in "total failure" in many cases due to insane burn-rates in quest for "hockey-stick growth"
- lepunk 11y agoThat is a fair question, and a "what if" type so its hard to answer. if you assume an ideal world with sane CEOs than it shouldn't matter what the investors expect. The startup should burn cash at an optimal rate to achieve the highest profit. Of course don't live in an optimal world...
- netcan 11y agoQuestions for YC (I think): (1) Is this a good thing? IE should founders, employees, VCs or other shareholders be able to cash in shares? (2) Is this fixable in some way?
- known 11y ago"No one can make you feel inferior without your consent." --Roosevelt