13 ms·

Paul Buchheit on Lessons Learned from Investing in 200 Startups

303 points by darwhy 9y ago

pdog 9y ago
> I was interested in making [Gmail] freely available and came up with the ads system. This decision set a terrible precedent. It made it acceptable for a company to deliver "tailored advertising" by reading all your emails. But I guess there are few alternatives to the ad-supported business model on the web facilitated by the vast collection of personal data. Still kind of sucks, though.
- hodgesrm 9y ago
  I don't see how you avoid some company reading your email and still have automatically indexed, infinitely scalable email in-boxes. Gmail is still the best game in town for this reason. The AI features are getting increasingly good--Gmail automatically creates calendar entries based on email content which is a pretty nice feature. More generally most cloud services are going to have the same properties. It would be more useful to define clear bounds of what companies can do with your data and back them up with workable legal protections.
  - beat 9y ago
    I welcome our new robot overlords. The data mining and the ads are the price I pay for such incredibly useful services, that don't cost me anything but a small bit of attention. And even the ads are good, because they're so nicely targeted.
  - jholman 9y ago
    I think that if the tradeoff were privacy vs automatic indexing, I'd be on the fence. And scalable doesn't require them to read our email; storage is nearly free. And the AI assistance features could run on a machine I own, without El Goog needing to be able to read my email. However, I really appreciate Google's ability to block spam, and I don't know of any way to make that work (at this level of quality) without a centralized service sharing spam-flagging between millions of users.
  - big_spammer 9y ago
    > I don't see how you avoid some company reading your email and still have automatically indexed, infinitely scalable email in-boxes. It's possible to with encrypted search.
baxtr 9y ago
>For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact. Really? How can you know what the path of Facebook would have been with a yahoo acquisition? That's like predicting the future. Besides, what is the real "impact" of Facebook? Which impact are we talking about? To the shareholder? To society? If he refers to the latter, I can think of no way to measure the "impact".
- neilk 9y ago
  Yahoo screwed up literally every acquisition in the social space that they made. After Google spanked them in search, generally they had ideas of somehow pivoting to social media, but they never executed. They had all the good fledgling social products, but wanted them to operate like media aggregation portals (the strategy that had always worked for them). Some people within Yahoo did see the shift that was coming, but their plans all got lost in corporate politics and architecture astronautery. Source: worked for acquired social startups within Yahoo around the same time.
deleted 9y ago
[deleted]
rattray 9y ago
> I wrote the first version of Gmail in a day! I hadn't heard that before; does anyone know of sources with more on this story?
- romanhn 9y ago
  From the man himself - http://paulbuchheit.blogspot.com/2009/01/communicating-with-code.html http://paulbuchheit.blogspot.com/2009/01/communicating-with-...
- wmblaettler 9y ago
  Another story about Gmail's beginnings: http://blogoscoped.com/archive/2007-07-16-n55.html http://blogoscoped.com/archive/2007-07-16-n55.html
- iamwil 9y ago
  Note that he also scoped it so that he'd be able to finish it in one day. The first version of gmail only searched his own email.
rabidrat 9y ago
> For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact. It seems to me that the world would be overall a better place if FB had sold to Yahoo. Yahoo would have screwed it up (like AOL with Myspace) and there would be more competition in the space all around. Monopolies are good for the investors, not for the customers.
- devoply 9y ago
  There are no instances I know of where anyone involved with skin in the game cares as to what happens to the outside actors. That's the nature of the system we have.
- fullshark 9y ago
  Or Google + would have taken off and there would be even less competition.
  - emiliobumachar 9y ago
    Google + was a reaction to Facebook's success and its ability to keep Google off its data. If Facebook had not existed, Google + would not exist either, at least not before another big, entrenched incumbent. Google created Orkut, an initially successful social network years before the rise of Facebook. Orkut died from scaling issues, something Google is really skilled at dealing with, had they really wanted to. I agree with your main point that something else could have been Facebook if not for Facebook.
    - fullshark 9y ago
      And that something could have been Google, meaning less competition.
- mandeepj 9y ago
  Zuck dropped the offer because Yahoo lower the price to ~$700 million. He has famously said he would have sold FB if yahoo kept the $1 billion tag. Buying companies for billions and billions of dollars is a skill in itself and requires a vision also which is not very common. I mean to say only people like Zuck can do it Edit - Added some more meat
sharemywin 9y ago
Jasper : Sam Altman has said that the only criterion Y Combinator uses to evaluate applying companies is, “Can this be a $10 billion plus company?” like Airbnb and Dropbox. While this model works great for a fund, there is an Early Exits movement that suggests individual entrepreneurs have a much higher likelihood of success when they raise less capital and target exits in the $20 million range. What do you think this view? Paul : The math does not support this strategy but if other investors want to try it that’s fine. Also, it is not just returns we are looking for but really impactful companies. When you sell too early you don’t realize the full potential.
- spitfire 9y ago
  I wish I could up vote this several times. I feel like a nice interactive JS widget letting you play around with portfolio variables (duration, %win, company size distribution, etc) would dissuade so many fledgling company founders.
- nostrademons 9y ago
  It's interesting to contrast this with the PG era of YCombinator: http://www.paulgraham.com/swan.html#f1n http://www.paulgraham.com/swan.html#f1n
  - sharemywin 9y ago
    [1] I'm not saying that the big winners are all that matters, just that they're all that matters financially for investors. Since we're not doing YC mainly for financial reasons, the big winners aren't all that matters to us. We're delighted to have funded Reddit, for example. Even though we made comparatively little from it, Reddit has had a big effect on the world, and it introduced us to Steve Huffman and Alexis Ohanian, both of whom have become good friends. Nor do we push founders to try to become one of the big winners if they don't want to. We didn't "swing for the fences" in our own startup (Viaweb, which was acquired for $50 million), and it would feel pretty bogus to press founders to do something we didn't do. Our rule is that it's up to the founders. Some want to take over the world, and some just want that first few million. But we invest in so many companies that we don't have to sweat any one outcome. In fact, we don't have to sweat whether startups have exits at all. The biggest exits are the only ones that matter financially, and those are guaranteed in the sense that if a company becomes big enough, a market for its shares will inevitably arise. Since the remaining outcomes don't have a significant effect on returns, it's cool with us if the founders want to sell early for a small amount, or grow slowly and never sell (i.e. become a so-called lifestyle business), or even shut the company down. We're sometimes disappointed when a startup we had high hopes for doesn't do well, but this disappointment is mostly the ordinary variety that anyone feels when that happens.
a_imho 9y ago
Was Google cooperating with the Chinese government that controversial? Cooperating with the NSA seemed to make bigger waves.
- prodmerc 9y ago
  Yeah it was widely discussed at the time, what with Google censoring results and whatnot.
- thearn4 9y ago
  I remember discussions about how it seemed congruent to the "do no evil" unofficial motto.
stevenj 9y ago
Paul's thoughts after his first three years angel investing (2011): http://paulbuchheit.blogspot.com/2011/01/angel-investing-my-first-three-years.html?m=1 http://paulbuchheit.blogspot.com/2011/01/angel-investing-my-...
dilap 9y ago
AMP is pretty evil.
jondubois 9y ago
>> My favorite anti-portfolio example is Airbnb. Michael Siebel (Y Combinator Core CEO) emailed me their deck before they joined Y Combinator and I couldn’t help but think “Wow, air mattress rental? That’s a terrible idea!” What's baffling is how people who can come up with such a silly idea can also come up with such a great idea as AirBnb. Without the immense help from YC, I'm sure they wouldn't have gone anywhere.
- seppin 9y ago
  Renting out your own apartments to strangers was arguably a "worse" idea than some airbed concept. The whole point is you never know, no one knows what catches until it happens.
theprop 9y ago
Great way of putting things: "I’ve discovered that most people are really good at finding obstacles."
6stringmerc 9y ago
Some genuinely encouraging thoughts here - very interesting to my relationship with Inventions vs. Long-Form Writing: >Paul : The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. Occasionally, I’ll ask a company, “Why do you think is a good idea?” And they’ll say, “Oh, I read an article in TechCrunch.” You have to understand it at a deep level. It can’t just be something you read. I also like people who get things done. If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign. I’ve discovered that most people are really good at finding obstacles. I don’t fund these people. One thing I've learned, over five years plus of developing Inventions, Pitches, and the occasional Prototype, is that there's a really big realization that Angel Investors / PE-type Investors don't want small businesses to figure out: If your idea is good, you can obtain a patent, and afford to take a loan <$50,000 to go from "Prototype-to-Trade Show Ready" then you don't need Investors. You don't need "wisdom and guidance" aiming for a quick ramp-up and exit. You don't need to think in Quarterly Capitalism terms. And, most importantly, you don't need to dilute your control whatsoever[1]. For a while I've caught some whiffs that the Investing Realm is quite a bit more "Me Too" risk averse than often portrayed. Very similar to the Music Industry. Labels don't want interesting life story pieces, they want bubblegum they can market to kids with some discretionary money to burn. Thus, I take a lot of the recent "Start Up" culture with a grain of salt, because the time, effort, and study it takes to create a genuinely valuable idea basically points to starting a "Traditional Small Business" moreso than any super-duper-evolution-in-funding-or-growth. YMMV of course. [1] It does help to study both success stories, failures, and Public Slap Fights (Cruise, Otto); while I've solicited in the past, I've cooled to the idea and instead plan to go my own Patent-Prototype-Promote business model.
- GFischer 9y ago
  I disagree about the amount of money needed to bootstrap (for the kind of ideas VCs invest on, not for niche products or lifestyle businesses I mean). Patents aren't worth the paper they're printed on unless you have money to defend them, and are very likely to be overturned in court without that (OTOH there are some ridiculous patents that the patent-holders have enough money to make them stick). Going with your hypothetical model, once you've burned out your 50.000 ramp, then what? I'm trying to build my own product, and without outside investment it's freaking hard.
MarkMc 9y ago
Great advice: "If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign." "Just get started and deliver now. You should have a long term vision but must also act right now, have near term deliverables and be in contact with the customer."
hn_throwaway_99 9y ago
> My favorite anti-portfolio example is Airbnb. Michael Siebel (Y Combinator Core CEO) emailed me their deck before they joined Y Combinator and I couldn’t help but think “Wow, air mattress rental? That’s a terrible idea!” I've heard this sentiment repeated a lot ("Everyone thought AirBnB was a horrible idea"), but I honestly can't imagine why, and it makes me think AirBnB must have just had a bad initial pitch deck. At the time AirBnB was founded, Couchsurfing was already really popular, and HomeAway had received some gargantuan investment rounds. Is it really that much of a stretch to say people would want a safe, secure way to rent out private accommodations?
- abecedarius 9y ago
  Maybe a big part of the reason is that investors and VCs are rich. I wondered about this too.
  - princeb 9y ago
    yeah, if you've never ever had to couchsurf, you will never figure out the appeal of airbnb. I've used airbnb once - to rent a serviced apartment for several months. i'd never use airbnb to rent a room.
- sirspacey 9y ago
  The reason AirBnB was so tough to fund, at least from Fred's post, is because it represented a change in cultural norms. Investors are very resistant to ideas that change people's behavior - particularly if the investor can't picture making that change in their own lives.
  - shanev 9y ago
    Also the website back then was airbedandbreakfast.com, way too long and complex of a domain. Couchsurfing was huge, and I guess investors didn't think a paid version of it would take off if a free version existed. At least that's how I thought about it when I rejected Joe's offer to work on the site in 2008.
  - 9y ago
sirspacey 9y ago
Great insights, better said than most, but nothing new here. Definitely not unique insights from investing in 200+ startups vs 20 or 2.
F_J_H 9y ago
Love this: >>Larry Page assigned the project to me. He said, “Build some kind of email something” and chose me because I had an interest in email. This is how you know you've found an awesome developer - someone who only needs to be given only a high-level vision of what is needed, and who can then run with it, fill in the details, and deliver something more awesome than you thought possible. Reminds me of the famous "Message to Garcia" essay from way back in 1899: (http://www.benning.army.mil/infantry/199th/ocs/content/pdf/message%20to%20garcia.pdf http://www.benning.army.mil/infantry/199th/ocs/content/pdf/m...) Or, a more current parable found in a post by Benjamin Hardy(1): A certain farmer had become old and ready to pass his farm down to one of his two sons. When he brought his sons together to speak about it, he told them: The farm will go to the younger son. The older son was furious! “What are you talking about?!” he fumed. The father sat patiently, thinking. “Okay,” the father said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?” The older son shortly returned and reported, “Father, Cibi has 6 cows for sale.” The father graciously thanked the older son for his work. He then turned to the younger son and said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?” The younger son did as he was asked. A short while later, he returned and reported, “Father, Cibi has 6 cows for sale. Each cow will cost 2,000 rupees. If we are thinking about buying more than 6 cows, Cibi said he would be willing to reduce the price 100 rupees. Cibi also said they are getting special jersey cows next week if we aren’t in a hurry, it may be good to wait. However, if we need the cows urgently, Cibi said he could deliver the cows tomorrow.” The father graciously thanked the younger son for his work. He then turned to the older son and said, “That’s why your younger brother is getting the farm.” 1 https://benjaminhardy.com/one-behavior-separates-successful-average/ https://benjaminhardy.com/one-behavior-separates-successful-...
- gregpilling 9y ago
  The "Message to Garcia" is great, thank you for that. I love that while it was written in 1899 it still seems to be true; will likely be still true in 100 years I think.
- temp246810 9y ago
  The truth is youre more likely to find the skills within a talented team and not individual. Someone with a knack for product AND great engineering chops is extremely rare. Not disagreeing with you, if anything bolstering your point.
ndr 9y ago
Best quote: > Just get started and deliver now. [...] Don’t disappear for years working on this thing, completely disconnected from the world. An extreme example of this is, I wrote the the first version of Gmail in a day!
SirLJ 9y ago
I truly believe in small life style business is much better than "pie in the sky" 10B startup that will happened once every 10 years and 99% will fail hurting employees, owners and small investors...
tkt 9y ago
> Paul: The best startups come from personal experience. It was something you or someone you know needed. I've seen this comment before. It emphasizes the need for more founders with diverse backgrounds. More types of problems solved and more opportunities to reach new markets.
graycat 9y ago
Paul has some good observations, but IMHO what he has so far has just been lucky due to the general potential of Moore's law and the Internet. IMHO, with the astoundingly high growth rates of Moore's law and the Internet over, his ideas won't work now. E.g., he wrote the first version of G-mail in a day. Okay. We can't expect more Googles from such efforts. Paul, YC, and Silicon Valley have been taken in from their successes, their Sand Hill Road echo chamber, and their own Kool-Aid. Instead of such influences, we have some much better examples of doing big things from the all-time, unique, world-class, grand champion of really big successes from really big technology, the US DoD, with high irony, what got Silicon Valley going, along with Dean Terman. For runner up, we have Bell Labs with the transistor, solid state lasers, and optical fibers. These successes were not done in a day. And with high irony, they were not risky, that is, the batting average was really high, much higher than VCs in Silicon Valley. Paul is making another big, fundamental mistake, really implicit in the subject and title of the interview, what can be learned from 200 investments: He does have some good lessons, but broadly what he explains is very much the wrong approach. Why? Because for his $20 billion criterion, necessarily he is looking for really exceptional, rare events. There's no hope at good lessons for such successes, such rare events, except just to count on luck, when looking at 200 projects where all or nearly all were just mediocre. Yes, these events are so rare and difficult to do that maybe most of them, that is, the Googles, Facebooks, etc., were more likely from luck, Moore's law, and the Internet than sufficiently good work with little or no good luck. He's just not looking at approaches that are good at detecting the desired rare events. Instead, it really is possible to conceive of, plan, and execute really big, earth changing work, with quite high reliability. E.g., did I mention the US DoD and Bell Labs? Uh, there's no way to see from Paul's lessons from the 200 startups just how the US DoD and Bell Labs were so successful. E.g., those organizations didn't need 200 rolls of the dice to get the Manhattan Project, GPS, stealth and the F-117, the SR-71, Keyhole (the DoD's Hubble, aimed at the earth instead of space), the transistor, solid state lasers, or optical fibers. And now we can include RSA, WMAP, LIGO, LHC, etc. -- no 199 failures to get one big success. Indeed, in all that work, nearly no failures. Also include the Human Genome project and the work of Craig Venter -- worked great, right away. But the conception, planning, and execution of such low risk, high payoff projects are not illustrated by Paul's, YC's, or Silicon Valley's investment or project evaluation approaches. Uh, hint: What Paul is describing is available to middle school students. So, we can set aside all education and research past middle school? SMTP, HotMail, Gmail -- those were simple projects, flashes in the pan from luck and the rapid growth of Moore's law and the Internet, and do not illustrate the approach to $20 billion for the future. Uh, early in e-mail, the software I had put one icon on my desktop for each e-mail message sent or received. I could wait for minutes for a single e-mail message to appear on my desktop. Total brain dead bummer. So, I got out the SMTP RFCs, read a little, use the interpretive language Rexx that had the TCP/IP calls, to write my own e-mail. For reading, writing e-mail, I used just my still favorite text editor -- KEdit. For converting to/from base 64 for the MIME attachments, I wrote some code in Rexx. My e-mail had a file that permitted nicknames and groups. It worked great. It put all the e-mail I sent/received, just as it was sent/received, exactly, in a file -- appended to the file with a delimiter line after each e-mail message. When the file got over 10 MB, I started another one. I still have all the files, and finding messages in the files is easy. I wrote all of it in just one afternoon except did the base 64 stuff in another afternoon. My e-mail set up was good enough that I had a cute feature: In files of other work, I'd put just the date line from an e-mail message as a link to that message, and one keystroke in KEdit would cause KEdit to get and display that e-mail message. Sure, the date lines do not have to be distinct, but I never found a duplicate! I was not lucky enough to get rich from it, but I used it for about 10 years, until I got a copy of Outlook 2003. I still wish I knew the syntax of the Outlook PST files or whatever they are called so that I could implement links to those. So, really in some ways, my little one afternoon project remains better than Outlook 2003. Writing basic client side e-mail is dirt simple and no big accomplishment in any sense. We don't want to be duped into believing that the last $100 million lottery winner has some really great ideas! In comparison with the DoD, etc. work, the work of Paul, YC, SV, etc. is, really, brain-dead. For more, Paul's approaches are not what got us to 14 nm and won't get us to 10 or 7 nm. Uh, NASA and, IIRC, JPL, launched some equipment into space and eventually sent back some astounding pictures of -- sit down for this one -- Pluto. Up close. First time. No 200 failures for the one success. But, wait, there's more: With the current power and prices of computing and the Internet, there is a very special case of information technology. There we take in bits, manipulate them, and put out bits. The goal is to have the output bits be darned valuable, well over the $20 billion criterion. Then, what is the key to evaluating such work? The team? Personal need? The attitude? The determination? Their desire to get the main work done in a day? Their grit? Their novelty? Their interview impression? Other imponderables and tea-leaf reading? Hand shake style? Eye contact? "Taking the measure" of the person? And may I have the envelope please? [Drum roll}. And the winner is .... I'll keep that a secret (hint: None of the above.).
7cupsoftea 9y ago
PB was the first investor in 7 Cups. I'm thankful for all of the ways that he helped us. He is very good at motivating founders. I can't all the way understand how he does it, but it is remarkable. I think a big part of it is helping people face reality directly. i.e., he alludes to this in the interview when he says most people are good at finding obstacles (i.e., excuses) and that he doesn't fund them. He is good at keeping you honest so that you do not delude yourself into making fake progress or going down wrong turns. Another way of saying this is that he helps you minimize denial. Quick story: I had been working on 7 Cups for about a month prior to getting to YC. I had a home page up, which I was pretty excited about. The core idea of the chat/voice support wasn't yet live. I showed him the website and wanted to show him some of the segments we wanted to focus on (parents of children with disabilities, veterans etc.). He quickly asked - have you got the actual product in front of users yet? I tried to dodge the question, talk more about the site etc. He repeated the question. I had to honestly answer that no we hadn't yet released it. He was like, okay go do that and report back next week. I was stalling because, on some level, I was afraid that it wouldn't work as well as I hoped. We pushed through, launched it, and learned a ton in that next week. For example, we learned that voice was too intimate and people preferred messaging. And that basic cycle happened over and over again. Like there might be things that sound right or are even partially right, but if they are not the most direct thing that is going to help you learn and make a product people want, then it is probably not a good use of your time.
jonbarker 9y ago
PB says the math doesnt support the early exit strategy. What math? Not trolling just would love to see more details.
- sfifs 9y ago
  For him as an investor it doesn't.
dlo 9y ago
> The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. My cofounder and I chose our idea as a result of reading research papers. We were so prescient with our analysis that we found many people within our circles who needed what we built. I became a user myself -- it ended up saving me! Guess I'll have to pass on getting funding from pb. :-)
dzonga 9y ago
I wrote the first version of Gmail in a day!! #damn
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303 points by darwhy 9y ago

pdog 9y ago

> I was interested in making [Gmail] freely available and came up with the ads system. This decision set a terrible precedent. It made it acceptable for a company to deliver "tailored advertising" by reading all your emails. But I guess there are few alternatives to the ad-supported business model on the web facilitated by the vast collection of personal data. Still kind of sucks, though.

hodgesrm 9y ago
I don't see how you avoid some company reading your email and still have automatically indexed, infinitely scalable email in-boxes. Gmail is still the best game in town for this reason. The AI features are getting increasingly good--Gmail automatically creates calendar entries based on email content which is a pretty nice feature. More generally most cloud services are going to have the same properties. It would be more useful to define clear bounds of what companies can do with your data and back them up with workable legal protections.
- beat 9y ago
  I welcome our new robot overlords. The data mining and the ads are the price I pay for such incredibly useful services, that don't cost me anything but a small bit of attention. And even the ads are good, because they're so nicely targeted.
- jholman 9y ago
  I think that if the tradeoff were privacy vs automatic indexing, I'd be on the fence. And scalable doesn't require them to read our email; storage is nearly free. And the AI assistance features could run on a machine I own, without El Goog needing to be able to read my email. However, I really appreciate Google's ability to block spam, and I don't know of any way to make that work (at this level of quality) without a centralized service sharing spam-flagging between millions of users.
- big_spammer 9y ago
  > I don't see how you avoid some company reading your email and still have automatically indexed, infinitely scalable email in-boxes. It's possible to with encrypted search.

baxtr 9y ago

>For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact. Really? How can you know what the path of Facebook would have been with a yahoo acquisition? That's like predicting the future. Besides, what is the real "impact" of Facebook? Which impact are we talking about? To the shareholder? To society? If he refers to the latter, I can think of no way to measure the "impact".

neilk 9y ago
Yahoo screwed up literally every acquisition in the social space that they made. After Google spanked them in search, generally they had ideas of somehow pivoting to social media, but they never executed. They had all the good fledgling social products, but wanted them to operate like media aggregation portals (the strategy that had always worked for them). Some people within Yahoo did see the shift that was coming, but their plans all got lost in corporate politics and architecture astronautery. Source: worked for acquired social startups within Yahoo around the same time.

deleted 9y ago

[deleted]

rattray 9y ago

> I wrote the first version of Gmail in a day! I hadn't heard that before; does anyone know of sources with more on this story?

romanhn 9y ago
From the man himself - http://paulbuchheit.blogspot.com/2009/01/communicating-with-code.html http://paulbuchheit.blogspot.com/2009/01/communicating-with-...
wmblaettler 9y ago
Another story about Gmail's beginnings: http://blogoscoped.com/archive/2007-07-16-n55.html http://blogoscoped.com/archive/2007-07-16-n55.html
iamwil 9y ago
Note that he also scoped it so that he'd be able to finish it in one day. The first version of gmail only searched his own email.

rabidrat 9y ago

> For example, Facebook had an offer from Yahoo for a billion dollars, which everyone told Zuck to take. Fortunately, he said no. Had he said yes, it would have been another failed Yahoo acquisition and Facebook would not have nearly as much impact. It seems to me that the world would be overall a better place if FB had sold to Yahoo. Yahoo would have screwed it up (like AOL with Myspace) and there would be more competition in the space all around. Monopolies are good for the investors, not for the customers.

devoply 9y ago
There are no instances I know of where anyone involved with skin in the game cares as to what happens to the outside actors. That's the nature of the system we have.
fullshark 9y ago
Or Google + would have taken off and there would be even less competition.
- emiliobumachar 9y ago
  Google + was a reaction to Facebook's success and its ability to keep Google off its data. If Facebook had not existed, Google + would not exist either, at least not before another big, entrenched incumbent. Google created Orkut, an initially successful social network years before the rise of Facebook. Orkut died from scaling issues, something Google is really skilled at dealing with, had they really wanted to. I agree with your main point that something else could have been Facebook if not for Facebook.
  - fullshark 9y ago
    And that something could have been Google, meaning less competition.
mandeepj 9y ago
Zuck dropped the offer because Yahoo lower the price to ~$700 million. He has famously said he would have sold FB if yahoo kept the $1 billion tag. Buying companies for billions and billions of dollars is a skill in itself and requires a vision also which is not very common. I mean to say only people like Zuck can do it Edit - Added some more meat

sharemywin 9y ago

Jasper : Sam Altman has said that the only criterion Y Combinator uses to evaluate applying companies is, “Can this be a $10 billion plus company?” like Airbnb and Dropbox. While this model works great for a fund, there is an Early Exits movement that suggests individual entrepreneurs have a much higher likelihood of success when they raise less capital and target exits in the $20 million range. What do you think this view? Paul : The math does not support this strategy but if other investors want to try it that’s fine. Also, it is not just returns we are looking for but really impactful companies. When you sell too early you don’t realize the full potential.

spitfire 9y ago
I wish I could up vote this several times. I feel like a nice interactive JS widget letting you play around with portfolio variables (duration, %win, company size distribution, etc) would dissuade so many fledgling company founders.
nostrademons 9y ago
It's interesting to contrast this with the PG era of YCombinator: http://www.paulgraham.com/swan.html#f1n http://www.paulgraham.com/swan.html#f1n
- sharemywin 9y ago
  [1] I'm not saying that the big winners are all that matters, just that they're all that matters financially for investors. Since we're not doing YC mainly for financial reasons, the big winners aren't all that matters to us. We're delighted to have funded Reddit, for example. Even though we made comparatively little from it, Reddit has had a big effect on the world, and it introduced us to Steve Huffman and Alexis Ohanian, both of whom have become good friends. Nor do we push founders to try to become one of the big winners if they don't want to. We didn't "swing for the fences" in our own startup (Viaweb, which was acquired for $50 million), and it would feel pretty bogus to press founders to do something we didn't do. Our rule is that it's up to the founders. Some want to take over the world, and some just want that first few million. But we invest in so many companies that we don't have to sweat any one outcome. In fact, we don't have to sweat whether startups have exits at all. The biggest exits are the only ones that matter financially, and those are guaranteed in the sense that if a company becomes big enough, a market for its shares will inevitably arise. Since the remaining outcomes don't have a significant effect on returns, it's cool with us if the founders want to sell early for a small amount, or grow slowly and never sell (i.e. become a so-called lifestyle business), or even shut the company down. We're sometimes disappointed when a startup we had high hopes for doesn't do well, but this disappointment is mostly the ordinary variety that anyone feels when that happens.

a_imho 9y ago

Was Google cooperating with the Chinese government that controversial? Cooperating with the NSA seemed to make bigger waves.

prodmerc 9y ago
Yeah it was widely discussed at the time, what with Google censoring results and whatnot.
thearn4 9y ago
I remember discussions about how it seemed congruent to the "do no evil" unofficial motto.

stevenj 9y ago

Paul's thoughts after his first three years angel investing (2011): http://paulbuchheit.blogspot.com/2011/01/angel-investing-my-first-three-years.html?m=1 http://paulbuchheit.blogspot.com/2011/01/angel-investing-my-...

dilap 9y ago

AMP is pretty evil.

jondubois 9y ago

>> My favorite anti-portfolio example is Airbnb. Michael Siebel (Y Combinator Core CEO) emailed me their deck before they joined Y Combinator and I couldn’t help but think “Wow, air mattress rental? That’s a terrible idea!” What's baffling is how people who can come up with such a silly idea can also come up with such a great idea as AirBnb. Without the immense help from YC, I'm sure they wouldn't have gone anywhere.

seppin 9y ago
Renting out your own apartments to strangers was arguably a "worse" idea than some airbed concept. The whole point is you never know, no one knows what catches until it happens.

theprop 9y ago

Great way of putting things: "I’ve discovered that most people are really good at finding obstacles."

6stringmerc 9y ago

Some genuinely encouraging thoughts here - very interesting to my relationship with Inventions vs. Long-Form Writing: >Paul : The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. Occasionally, I’ll ask a company, “Why do you think is a good idea?” And they’ll say, “Oh, I read an article in TechCrunch.” You have to understand it at a deep level. It can’t just be something you read. I also like people who get things done. If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign. I’ve discovered that most people are really good at finding obstacles. I don’t fund these people. One thing I've learned, over five years plus of developing Inventions, Pitches, and the occasional Prototype, is that there's a really big realization that Angel Investors / PE-type Investors don't want small businesses to figure out: If your idea is good, you can obtain a patent, and afford to take a loan <$50,000 to go from "Prototype-to-Trade Show Ready" then you don't need Investors. You don't need "wisdom and guidance" aiming for a quick ramp-up and exit. You don't need to think in Quarterly Capitalism terms. And, most importantly, you don't need to dilute your control whatsoever[1]. For a while I've caught some whiffs that the Investing Realm is quite a bit more "Me Too" risk averse than often portrayed. Very similar to the Music Industry. Labels don't want interesting life story pieces, they want bubblegum they can market to kids with some discretionary money to burn. Thus, I take a lot of the recent "Start Up" culture with a grain of salt, because the time, effort, and study it takes to create a genuinely valuable idea basically points to starting a "Traditional Small Business" moreso than any super-duper-evolution-in-funding-or-growth. YMMV of course. [1] It does help to study both success stories, failures, and Public Slap Fights (Cruise, Otto); while I've solicited in the past, I've cooled to the idea and instead plan to go my own Patent-Prototype-Promote business model.

GFischer 9y ago
I disagree about the amount of money needed to bootstrap (for the kind of ideas VCs invest on, not for niche products or lifestyle businesses I mean). Patents aren't worth the paper they're printed on unless you have money to defend them, and are very likely to be overturned in court without that (OTOH there are some ridiculous patents that the patent-holders have enough money to make them stick). Going with your hypothetical model, once you've burned out your 50.000 ramp, then what? I'm trying to build my own product, and without outside investment it's freaking hard.

MarkMc 9y ago

Great advice: "If you’ve been working on your startup for two years and have nothing to show, that’s a pretty bad sign." "Just get started and deliver now. You should have a long term vision but must also act right now, have near term deliverables and be in contact with the customer."

hn_throwaway_99 9y ago

> My favorite anti-portfolio example is Airbnb. Michael Siebel (Y Combinator Core CEO) emailed me their deck before they joined Y Combinator and I couldn’t help but think “Wow, air mattress rental? That’s a terrible idea!” I've heard this sentiment repeated a lot ("Everyone thought AirBnB was a horrible idea"), but I honestly can't imagine why, and it makes me think AirBnB must have just had a bad initial pitch deck. At the time AirBnB was founded, Couchsurfing was already really popular, and HomeAway had received some gargantuan investment rounds. Is it really that much of a stretch to say people would want a safe, secure way to rent out private accommodations?

abecedarius 9y ago
Maybe a big part of the reason is that investors and VCs are rich. I wondered about this too.
- princeb 9y ago
  yeah, if you've never ever had to couchsurf, you will never figure out the appeal of airbnb. I've used airbnb once - to rent a serviced apartment for several months. i'd never use airbnb to rent a room.
sirspacey 9y ago
The reason AirBnB was so tough to fund, at least from Fred's post, is because it represented a change in cultural norms. Investors are very resistant to ideas that change people's behavior - particularly if the investor can't picture making that change in their own lives.
- shanev 9y ago
  Also the website back then was airbedandbreakfast.com, way too long and complex of a domain. Couchsurfing was huge, and I guess investors didn't think a paid version of it would take off if a free version existed. At least that's how I thought about it when I rejected Joe's offer to work on the site in 2008.
- 9y ago

sirspacey 9y ago

Great insights, better said than most, but nothing new here. Definitely not unique insights from investing in 200+ startups vs 20 or 2.

F_J_H 9y ago

Love this: >>Larry Page assigned the project to me. He said, “Build some kind of email something” and chose me because I had an interest in email. This is how you know you've found an awesome developer - someone who only needs to be given only a high-level vision of what is needed, and who can then run with it, fill in the details, and deliver something more awesome than you thought possible. Reminds me of the famous "Message to Garcia" essay from way back in 1899: (http://www.benning.army.mil/infantry/199th/ocs/content/pdf/message%20to%20garcia.pdf http://www.benning.army.mil/infantry/199th/ocs/content/pdf/m...) Or, a more current parable found in a post by Benjamin Hardy(1): A certain farmer had become old and ready to pass his farm down to one of his two sons. When he brought his sons together to speak about it, he told them: The farm will go to the younger son. The older son was furious! “What are you talking about?!” he fumed. The father sat patiently, thinking. “Okay,” the father said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?” The older son shortly returned and reported, “Father, Cibi has 6 cows for sale.” The father graciously thanked the older son for his work. He then turned to the younger son and said, “I need you to do something for me. We need more stocks. Will you go to Cibi’s farm and see if he has any cows for sale?” The younger son did as he was asked. A short while later, he returned and reported, “Father, Cibi has 6 cows for sale. Each cow will cost 2,000 rupees. If we are thinking about buying more than 6 cows, Cibi said he would be willing to reduce the price 100 rupees. Cibi also said they are getting special jersey cows next week if we aren’t in a hurry, it may be good to wait. However, if we need the cows urgently, Cibi said he could deliver the cows tomorrow.” The father graciously thanked the younger son for his work. He then turned to the older son and said, “That’s why your younger brother is getting the farm.” 1 https://benjaminhardy.com/one-behavior-separates-successful-average/ https://benjaminhardy.com/one-behavior-separates-successful-...

gregpilling 9y ago
The "Message to Garcia" is great, thank you for that. I love that while it was written in 1899 it still seems to be true; will likely be still true in 100 years I think.
temp246810 9y ago
The truth is youre more likely to find the skills within a talented team and not individual. Someone with a knack for product AND great engineering chops is extremely rare. Not disagreeing with you, if anything bolstering your point.

ndr 9y ago

Best quote: > Just get started and deliver now. [...] Don’t disappear for years working on this thing, completely disconnected from the world. An extreme example of this is, I wrote the the first version of Gmail in a day!

SirLJ 9y ago

I truly believe in small life style business is much better than "pie in the sky" 10B startup that will happened once every 10 years and 99% will fail hurting employees, owners and small investors...

tkt 9y ago

> Paul: The best startups come from personal experience. It was something you or someone you know needed. I've seen this comment before. It emphasizes the need for more founders with diverse backgrounds. More types of problems solved and more opportunities to reach new markets.

graycat 9y ago

Paul has some good observations, but IMHO what he has so far has just been lucky due to the general potential of Moore's law and the Internet. IMHO, with the astoundingly high growth rates of Moore's law and the Internet over, his ideas won't work now. E.g., he wrote the first version of G-mail in a day. Okay. We can't expect more Googles from such efforts. Paul, YC, and Silicon Valley have been taken in from their successes, their Sand Hill Road echo chamber, and their own Kool-Aid. Instead of such influences, we have some much better examples of doing big things from the all-time, unique, world-class, grand champion of really big successes from really big technology, the US DoD, with high irony, what got Silicon Valley going, along with Dean Terman. For runner up, we have Bell Labs with the transistor, solid state lasers, and optical fibers. These successes were not done in a day. And with high irony, they were not risky, that is, the batting average was really high, much higher than VCs in Silicon Valley. Paul is making another big, fundamental mistake, really implicit in the subject and title of the interview, what can be learned from 200 investments: He does have some good lessons, but broadly what he explains is very much the wrong approach. Why? Because for his $20 billion criterion, necessarily he is looking for really exceptional, rare events. There's no hope at good lessons for such successes, such rare events, except just to count on luck, when looking at 200 projects where all or nearly all were just mediocre. Yes, these events are so rare and difficult to do that maybe most of them, that is, the Googles, Facebooks, etc., were more likely from luck, Moore's law, and the Internet than sufficiently good work with little or no good luck. He's just not looking at approaches that are good at detecting the desired rare events. Instead, it really is possible to conceive of, plan, and execute really big, earth changing work, with quite high reliability. E.g., did I mention the US DoD and Bell Labs? Uh, there's no way to see from Paul's lessons from the 200 startups just how the US DoD and Bell Labs were so successful. E.g., those organizations didn't need 200 rolls of the dice to get the Manhattan Project, GPS, stealth and the F-117, the SR-71, Keyhole (the DoD's Hubble, aimed at the earth instead of space), the transistor, solid state lasers, or optical fibers. And now we can include RSA, WMAP, LIGO, LHC, etc. -- no 199 failures to get one big success. Indeed, in all that work, nearly no failures. Also include the Human Genome project and the work of Craig Venter -- worked great, right away. But the conception, planning, and execution of such low risk, high payoff projects are not illustrated by Paul's, YC's, or Silicon Valley's investment or project evaluation approaches. Uh, hint: What Paul is describing is available to middle school students. So, we can set aside all education and research past middle school? SMTP, HotMail, Gmail -- those were simple projects, flashes in the pan from luck and the rapid growth of Moore's law and the Internet, and do not illustrate the approach to $20 billion for the future. Uh, early in e-mail, the software I had put one icon on my desktop for each e-mail message sent or received. I could wait for minutes for a single e-mail message to appear on my desktop. Total brain dead bummer. So, I got out the SMTP RFCs, read a little, use the interpretive language Rexx that had the TCP/IP calls, to write my own e-mail. For reading, writing e-mail, I used just my still favorite text editor -- KEdit. For converting to/from base 64 for the MIME attachments, I wrote some code in Rexx. My e-mail had a file that permitted nicknames and groups. It worked great. It put all the e-mail I sent/received, just as it was sent/received, exactly, in a file -- appended to the file with a delimiter line after each e-mail message. When the file got over 10 MB, I started another one. I still have all the files, and finding messages in the files is easy. I wrote all of it in just one afternoon except did the base 64 stuff in another afternoon. My e-mail set up was good enough that I had a cute feature: In files of other work, I'd put just the date line from an e-mail message as a link to that message, and one keystroke in KEdit would cause KEdit to get and display that e-mail message. Sure, the date lines do not have to be distinct, but I never found a duplicate! I was not lucky enough to get rich from it, but I used it for about 10 years, until I got a copy of Outlook 2003. I still wish I knew the syntax of the Outlook PST files or whatever they are called so that I could implement links to those. So, really in some ways, my little one afternoon project remains better than Outlook 2003. Writing basic client side e-mail is dirt simple and no big accomplishment in any sense. We don't want to be duped into believing that the last $100 million lottery winner has some really great ideas! In comparison with the DoD, etc. work, the work of Paul, YC, SV, etc. is, really, brain-dead. For more, Paul's approaches are not what got us to 14 nm and won't get us to 10 or 7 nm. Uh, NASA and, IIRC, JPL, launched some equipment into space and eventually sent back some astounding pictures of -- sit down for this one -- Pluto. Up close. First time. No 200 failures for the one success. But, wait, there's more: With the current power and prices of computing and the Internet, there is a very special case of information technology. There we take in bits, manipulate them, and put out bits. The goal is to have the output bits be darned valuable, well over the $20 billion criterion. Then, what is the key to evaluating such work? The team? Personal need? The attitude? The determination? Their desire to get the main work done in a day? Their grit? Their novelty? Their interview impression? Other imponderables and tea-leaf reading? Hand shake style? Eye contact? "Taking the measure" of the person? And may I have the envelope please? [Drum roll}. And the winner is .... I'll keep that a secret (hint: None of the above.).

7cupsoftea 9y ago

PB was the first investor in 7 Cups. I'm thankful for all of the ways that he helped us. He is very good at motivating founders. I can't all the way understand how he does it, but it is remarkable. I think a big part of it is helping people face reality directly. i.e., he alludes to this in the interview when he says most people are good at finding obstacles (i.e., excuses) and that he doesn't fund them. He is good at keeping you honest so that you do not delude yourself into making fake progress or going down wrong turns. Another way of saying this is that he helps you minimize denial. Quick story: I had been working on 7 Cups for about a month prior to getting to YC. I had a home page up, which I was pretty excited about. The core idea of the chat/voice support wasn't yet live. I showed him the website and wanted to show him some of the segments we wanted to focus on (parents of children with disabilities, veterans etc.). He quickly asked - have you got the actual product in front of users yet? I tried to dodge the question, talk more about the site etc. He repeated the question. I had to honestly answer that no we hadn't yet released it. He was like, okay go do that and report back next week. I was stalling because, on some level, I was afraid that it wouldn't work as well as I hoped. We pushed through, launched it, and learned a ton in that next week. For example, we learned that voice was too intimate and people preferred messaging. And that basic cycle happened over and over again. Like there might be things that sound right or are even partially right, but if they are not the most direct thing that is going to help you learn and make a product people want, then it is probably not a good use of your time.

jonbarker 9y ago

PB says the math doesnt support the early exit strategy. What math? Not trolling just would love to see more details.

sfifs 9y ago
For him as an investor it doesn't.

dlo 9y ago

> The biggest one is made-up ideas. The best startups come from personal experience. It was something you or someone you know needed. My cofounder and I chose our idea as a result of reading research papers. We were so prescient with our analysis that we found many people within our circles who needed what we built. I became a user myself -- it ended up saving me! Guess I'll have to pass on getting funding from pb. :-)

dzonga 9y ago

I wrote the first version of Gmail in a day!! #damn

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