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WSJ interview with Paul Graham [video]
- davidw 17y agoHeh, "no soup for you!"
- Kliment 17y agoHow does the "no soup" provision work in legal terms? How do you (pg and co) ensure you don't get diluted in future rounds?
- pg 17y agoWe have protections against arbitrary dilution, by e.g. issuing extra stock or doing a new round that values the company at $1. We've never needed them. What I meant by the "no soup" remark was that we don't care that much about legal protections; it is a more powerful deterrent that we would blacklist any VC who screwed us over-- or who screwed over any of the startups.
- Kliment 17y agoThat in itself speaks strongly for YC. I'm tempted to make a joke about startup unionization.
- falsestprophet 17y agoIn general, is maintaining a good reputation an adequate incentive for VC firms to avoid abusing founders or angel investors?
- pg 17y agoEmpirically, very much so. Stories of investors maltreating founders are not uncommon in the startup world generally, but they are extremely rare among the YC alumni.
- newy 17y agoCreating this "repeat player" effect is awesome. Sometimes the best-drafted legal provisions can have loopholes. This kind of leverage makes everything much simpler.
- njrc 17y agoAwesome: "Judging by the reactions of the investors, the recession seems to be over."
- jeromec 17y agoAnd to think Paul Graham initially resisted investing. He seems to know this stuff so well it seems natural.
- pg 17y agoWell, I've been doing it full-time for 5 years now. And at the scale we operate on, 5 years is a lot of data. 172 startups is several times the number a VC partner would deal with in his career.
- jeromec 17y ago> 172 startups is several times the number a VC partner would deal with in his career. I wish VCs would take note.
- pclark 17y agowhat do you mean?
- jeromec 17y agoI mean VCs should invest in a higher number of startups, even if it's done by allowing less money per startup. At the very least they should have a simpler application process, with a clear decision time frame. These improvements would be hugely beneficial to startups, and would take just a bit of effort on the part of VCs/investors.
- neilk 17y agoThat's interesting. I just finished a biography a friend of mine wrote about his life as an accidental cheese-seller, and he mentions that he became an expert in just a few years, simply because he tried everything every vendor had to offer. Pretty soon he was at least as expert as any vendor, and often more knowledgeable. It's funny how much of life is just about putting in the hours. Maybe we'd like to think it's about talent or brainpower, but data wins pretty much every time.
- hristov 17y agoThat was nice. Although, the interviewer just talked too much. A good journalist knows how to get out of the way. I have a question for pg, if he is reading this. You said that about 70% of the companies exit YC with funding or do not need further funding because they are already bringing in money. Do you usually return your investment at this point, or do you wait until a later VC round, or do you generally wait to the point where the founders cash out to return your investment?
- pg 17y agoLike most investors, we wouldn't normally get any return till what in the business is called a "liquidity event," meaning either an acquisition or an IPO.
- astrec 17y agoDividends? Or a clear preference for 100% reinvestment in growth and a bigger liquidity event?
- pg 17y agoTechnology startups have never paid dividends. There are probably multiple reasons why not. There might be some way to tweak dividends to make them work for startups, but I know so little about that sort of thing that I wouldn't want to speculate.
- astrec 17y agoOn revision, thanks for deciphering my terse question. As an aside, I did invest in one web startup which took the unusual step of returning the entire first round investment by way of dividends prior to an IPO. Very peculiar and not US based, so I figure your assertion holds.
- fnid2 17y agoHow many of the startups from YC make it to a liquidity event? What happens to the 30% who don't get funding or make it to profitability?
- pg 17y agoI like this interview because I was in a really good mood when Peter shot it. The startups had just finished the second (of three) demo day sessions, and they had all just nailed their presentations. I was so relieved. You can see from their body language in the background that they're all happy too.