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The idea that check sizes should be small so people should be forced into dire financial situations is a terrible one, and one that would absolutely hurt divers

The idea that check sizes should be small so people should be forced into dire financial situations is a terrible one, and one that would absolutely hurt diversity. You're going to end up with a bunch of rich white dudes as founders (because very, very obviously the other way that people can afford to take smaller checks is if they have a lot of money in the bank). The smaller class size issue is probably fair, but reducing check sizes as a filtering method will absolutely filter out socioeconomically disadvantaged people. Just a terrible suggestion from somebody who I would wager heavily is not unsure of where his next meal is coming from.

dbbk 6y ago
Yeah I noped out of this as soon as I saw it. The guy is suggesting investing in startup founders but not giving them enough to live while they get that company off the ground. What is the point of that? Completely self-defeating.
- czbond 6y ago
  It is not YC’s job to support the company. That is the founders job. I’d suggest money supporting the company at seed diverts from a focus on monetary fit asap. $25k is enough to scrap by for enough months which should be the initial goal
  - TomMarius 6y ago
    The problem is there are many brilliant people that can't just scrap by - with a mortgage and family. But I respect the VC's right to choose the kind of people they sponsor.
    - forbiddenvoid 6y ago
      Yeah, the idea of creating an environment that only favors young, privileged, unattached folks has always been pretty off-putting for me. Larger checks certainly attract the 'free sabbatical' folks that the author seems to dislike so much, but it also enables entire classes of potential founders to have access to capital that enables them to focus on their business rather than their kids' stomachs.
      - jasonwatkinspdx 6y ago
        It's why we've had a glut of startups doing lifestyle products that appeal to mid/late 20's bros with lots of disposable income. These... haven't been great startups as a generalization.
      - peterwoerner 6y ago
        Counterpoint. As a father of a baby, I have significantly less energy and time for work. With starting a company you tend to have to plow a ton of hours and energy into the endeavor, especially if you want to move at bottleneck speed. With the baby there are many weeks where I have a difficulty working a mere 40 hours. That being said, I have significantly more insight (due to experience) than I did when I was more free and willing to work 60+ hours a week and was willing to live off of 20k a year.
        hkt 6y ago
        As a father of a 4 year old I don't think it is my job (or yours) to vet who gets the help they need when they decide they need it. You may not have felt you had the time and ability to commit, but why should you be able to speak for anyone but yourself?
        peterwoerner 6y ago
        Very valid.
        kaitai 6y ago
        But that's the thing -- most successful businesses (as opposed to youthful adventures that paint one as 'innovative' on a resume) are started by older founders who have a depth of experience in their field. As parent of a 3-yr old, babyhood goes fast. You'll be sleeping & able to put in extra hours, if you wish, at some point. You'll also notice that your patience for bullshit has decreased, your patience with actual important shit has increased, and by the time the kids in their teens you might be ready to be a founder who doesn't do the hustle-grind-performative-dance and actually... creates a business.
    - czbond 6y ago
      Yep - that's life. It's called 'the choices we make close doors'. Responsibilities we take on, have repercussions. Founders with such obligations can work at home after their job like every other person starting a small business that is not tech. That way they have infinite runaway, and personal life stress, but not 'monetary stress'.
  - whymauri 6y ago
    YC is an incubator, not a game show.
    - throwaway5752 6y ago
      Yes. They invest seed money. They help you turn an idea into a series A. Maybe it has lost it's soul because the round structures are so much looser, or the greater availability of angel money. Seed money used to be a godsend because you had a good idea that wasn't at a scale enough to interest traditional VC and you didn't know an angel. YC was particularly great because it had the emphasis on the network and the larger number of investments allowed it to distribute risk across the class. They purpose was not to build a company or make a good living, it allowed you to create a company you wouldn't have been able to, otherwise. I agree with the gp post, the goal is not to fund a sustainable company, it's to get one off the ground.
  - save_ferris 6y ago
    No, it just diverts focus from building a successful company to figuring out how to eat. Forcing entrepreneurs to risk devastating personal bankruptcy just isn’t kosher, and there’s zero evidence that it creates healthy companies. It just encourages founders to take even more risks, which aren’t always ethical (i.e. Instacart’s predatory pricing and tipping model).
    - sushshshsh 6y ago
      While this strikes me as possibly true, maybe even probably true, I would prefer to see actual simple data about this. Sure it would be hard to get but here's the schema I imagine would be needed. Founder ID, Founder bank account balance average during company's first year, Founder health metrics array [acute visits to hospital or clinic for diet/mental health issues], Outcome of company --- If we notice that founders with low bank balances, lots of health events in their life, and unsuccessful business outcomes are popping up in the data, and then conversely founders with 100k in their personal bank on day 1 are never visiting the hospital and their companies are doing fine, then I think we could call check size a definitive contributing factor. This would fly in the face of "ramen profitability" as a virtue. EDIT: and i think there are enougg startups out there (40,000 probably??? ask crunchbase) to have a meaningful sample size
  - jasonwatkinspdx 6y ago
    This is absolutely terrible advice. There are a few professional services that can have a dramatic impact on the early success of a startup. You need the best PR firm you can get to return your calls. That ain't cheap, but it has a rather huge impact if used properly.
    - _curious_ 6y ago
      "You need the best PR firm you can get to return your calls." Saying someone "needs" something (ie paid PR) in order to succeed could also be deemed terrible advice.
      - jasonwatkinspdx 6y ago
        This has been one of the critical differences between the startups I've worked at that have found successful exits and those that floundered. A good PR firm can you get a national audience for pennies compared to paying for ads.
        _curious_ 6y ago
        I believe it, though there is plenty of opportunity for earned media - its not PR firm, ads, or nothing...
  - bananaface 6y ago
    It's not about "who's job it is", it's about supply and demand. The founder could probably get a 300k salary at Google or a six-figure stipend with another investor. If Y-Combinator wants to compete they have to provide something that outweighs that.
    - cameronbrown 6y ago
      How is it YC's problem? The founder is choosing to start a company and asking YC for money. Clearly they're not short of startups on the supply side of their equation.
      - bananaface 6y ago
        You're not thinking about it the right way. It doesn't matter if they have "enough" applicants. They're trying to fill the positions with the best candidates out there - who they will just have to compete for. The more barriers they put up, the shittier the candidates they will get.
    - czbond 6y ago
      Why would Y comb need to compete with someone who is considering an offer to G? In that case, the founder would leave for the better deal anyways - so it's best to leave before it gets REALLY hard.
      - bananaface 6y ago
        Ok, but now you're filtering out a good chunk of people smart enough to work for G - so your applicant pool just got dumber.
        czbond 6y ago
        Disagree. If someone's choice either is to work for G, or start the company, it is the founders risk to take and give up that job for the outsized risk and return of starting up. It is not YC's need to compensate a founder for their alternative.
- seertaak 6y ago
  > Yeah I noped out of this as soon as I saw it. I must be misunderstanding you; I read that as you stopped reading the entire thread because there was a single point you disagree with. Is that what you mean?
  - klyrs 6y ago
    Suppose the first slide of my 10 minute sales deck described building a house out of literal waffles, and letting customers eat those waffles. Would you actually pay attention to the other 9 minutes? Overlooking the fact that if I attempted such a thing it would be amusing as hell. Imagine somebody taking that idea very seriously.
    - CalChris 6y ago
      Waffle House exists [1] and so this sounds likes like a buried lede which is way better than most pitches. I've heard worse, much worse. [1] https://www.wafflehouse.com/ https://www.wafflehouse.com/
      - tedivm 6y ago
        There's a difference between "sells waffles" and "constructions a house using waffles as the building material", and I'm reasonably sure the second one doesn't exist.
        sjm-lbm 6y ago
        I feel like the point is "you never know when an apparently crazy idea will turn into something reasonable, so you should always stick with someone until the end of their pitch and/or point." Admittedly, I'm not sure that's universally true (we all have a limited amount of time, and it's reasonable to focus that time in places where it is going to give us the most benefit), but I'm pretty sure I see where the commenter is coming from.
        bananaface 6y ago
- djsumdog 6y ago
  I think back to Paul Graham's list of things that kill a startup: http://paulgraham.com/startupmistakes.html http://paulgraham.com/startupmistakes.html He does list having both too little money and too much money. I agree, maybe the $25k made sense back before life in California was more expensive than living in Manhattan, and it should be enough to cover more living expenses. Maybe alternatively, YC could provide less money, but basic housing and needs so founders minimals could be met, while also providing them a collaborative environment?
  - KajMagnus 6y ago
    > basic housing What about a YC building complex a bit outside SF? Maybe one close to NY too, and ... two in Europe, two in ... each continent? :- ) "Ycplex"? "Hackerplex"? There could be a gym so people could stay healthy (and what about child care & school?).
- Nasrudith 6y ago
  I think the idea is to not be an "attractive nuisance" to get strung along by ideas which look good but don't work out. There is some theoretical strategic merit but it doesn't seem to synergize. It seems at odds with the Venture Capital model in the first place of rushing growth over profits and letting the wins make up for losses. Especially if he has a larger pool of capital than when he started (which he should unless he is doing it wrong), smaller checks /and/ wanting more personal attention and less canidates. That just cannot scale up to larger ammounts of money by definition, even if it would yield a better rate of return on investment in dollars. Diversification is another option for fund self-perpetuation but it will likely not have the same yields and cause total portfolio growth to decline with size. As for motivations I guess either trying to eat his cake and have it too.
site-packages1 6y ago
The solution may be wrong, but the idea is right. If people can just casually come into YC with no particular consequences for failure, that greatly reduced drive to succeed. "I'll just go back to FAMGAN after" or "I'll be able to transition from MBA grad + YC to something high paying" I don't think is great for success drive.
- baq 6y ago
  you can be motivated without going hungry. not being able to afford basic things is extremely stressful and takes time away from doing whatever YC wants them to do - that time is spent making sure that food is on the table. exactly the opposite of what you intend.
  - throwawayway9 6y ago
    Well said, I don't believe it is beneficial increase a person's anxiety to extreme levels just because some people think that makes them work harder.
    - _curious_ 6y ago
      For some founders & entrepreneurs, it forces them to work smarter - not necessarily harder - and that's the goal, to figure out what isn't working right and change it to reduce/eliminate the anxiety caused by an under-performing startup.
  - czbond 6y ago
    Yes - but this is what every company does at founding. Get really lean, survive on whatever it can. Founders should expect company building to be a nervous and anxiety inducing endeavor for 7 years. It is incredibly painful - and not for those who see it closer to a paid sabbatical
    - forbiddenvoid 6y ago
      If that logic were true, then there would be far fewer companies built by founders who already have a successful exit. The success of a company is far more likely to be correlated by the founders not having to put their own wellbeing on the line than the other way around. I think, as a point of failure, that most would agree that a system that allows a few people a 'free sabbatical' but also provides security for those founders who would not succeed without it, but who will with it is a good thing.
relaunched 6y ago
They are doubling down on what works. I'd be very interested to learn if Ycombinator has diversity and inclusion as a value and if they discussed what smaller checks might mean on D&I. It's interesting how the best incubator found that smaller checks out of the gate is beneficial, but you can raise a 30-50 million series B and founders can take a few million off the table, which is also good, so they can go long.
Alex3917 6y ago
It also doesn't make any sense from an investment perspective. Reddit would have been one of the most successful YC companies of all time, except for that they basically had to shut down because they couldn't raise money. This happened to lots of early YC companies that could have otherwise been successful. Had Reddit not sold for pennies on the dollar to Conde Nast, that alone would have probably paid for the extra 100k for every YC startup since.
- awillen 6y ago
  Great point. People think a willingness to take extreme financial risks is somehow a useful personality trait when it comes to entrepreneurship because of selection bias. People who take that risk and make it tell that story. People who take that risk and don't make it aren't heard from. People who don't take that risk also aren't heard from. There are lots of people with great ideas and the ability to execute on them who also have a deep sense of financial responsibility that precludes them from going 50k into credit card debt.
  - mgkimsal 6y ago
    > People who take that risk and don't make it aren't heard from when you do, it's often quite heartbreaking. have read a few online, and knew one personally - kept going in to further debt, ended up getting divorced and creating a huge rift in his family, etc.
  - CerealFounder 6y ago
    It's all just legacy from the insane power dynamic that comes from a relatively broke entrepreneur and an investor with money. The only thing that seems to stem true about the myth about "founders should be paid too much" is that when you suddenly have more resources than you ever had, you tend to be exposed to new distractions.
  - sangnoir 6y ago
    And often, getting credit card debt is not a material risk, but a minor embarrassment when they ask their family to bail them out and/or move in the guest house for a few months, rent-free. When poorer folk take the "same" risk, they can be ruined for decades.
doorstar 6y ago
We have a silicon valley success story in our family. His parents were telling me how he built everything up out of nothing, clearly unaware of their own contribution. He could pour all his money into his start-up because if he'd lost every dime he could have moved back in with them. He'd have his own bedroom, bathroom, and a fresh-cooked meal every night. He could have stayed with them as long has he wanted. Very few people have that kind of soft-landing.
- pal_9000 6y ago
  Exactly what i wanted to post. Also excludes everyone who is married or has to feed their family.
- Jommi 6y ago
  I don't know think this is as clear. Can you link me to some researcher where a stronger social net leads to better entrepreneur outcomes? Because looking at country level data, USA, with it's terribly scary and risky path of entrepreneurship completely outperforms welfare state countries like the Nordics. You could say the difference is from capital markets, but still even the difference in startups that are not successes is humongous.
  - btilly 6y ago
    Do you have statistics demonstrating that, per capita, the USA outperforms Nordic countries on entrepreneurship? I don't either way. But I have run across the counterintuitive fact that Nordic countries outperform the USA on how many people per capita are worth at least $30 million. And at least some of them got there through entrepreneurship.
    - djhn 6y ago
      Can't ignore old money. Nordics (most obviously Sweden and Denmark), Baltics (Lithuania) and many CEE countries (Poland) have hundreds of old aristocratic families with family trees two to four times as old as the US.
  - 6y ago
gorpomon 6y ago
Agree-- the idea that limited means "always" fosters resourcefulness is a gross sentiment that has long been debunked. For many folks limited means just means extra stress with no added chances of success. Maybe the founder saying this is motivated by less money, but most people aren't and this would just further limit diversity.
yters 6y ago
Maybe the point of economic filtering is to only accept single young men, who can devote every waking moment to their startup without any concern for dependents and such. You can get great velocity from such a pool. Myself, with family, mortgage, etc. I would never be able to achieve that kind of velocity if I were accepted to YC. So, even if I had incredible ideas, as people around here keep saying, and PG makes clear in his Viaweb essay, it is not about the ideas but about execution. Thus, the economic filtering for those who are unencumbered and thus can really execute on their idea or something that YC comes up with makes a lot of sense.
- Jommi 6y ago
  I don't understand this point. Do you think anyone at any life situation should have equal opportunity of becoming a successful entrepreneur? You do realize that by having a family and owning a house, you're pretty much on a completely different financial and stability level than a single young male.
  - yters 6y ago
    I am just saying the small grant makes a lot of sense from the YC worldview. And, if someone has family, house, etc. to provide stability do they need YC financial assistance?
    - jfk13 6y ago
      Family and house do not necessarily provide stability; they may just provide added responsibilities. I can't feed my house to my kids.
      - yters 6y ago
        That's why farming was the original startup!
- treis 6y ago
  >Maybe the point of economic filtering is to only accept single young men, who can devote every waking moment to their startup without any concern for dependents and such. Maybe I am missing something here, but why can't women do that too?
mytailorisrich 6y ago
> white dudes Not sure what skin colour has to do with the topic. Could we stop assigning racial etiquettes and discriminating based on skin colour? Not to mention racial stereotypes in this case.
- Pelic4n 6y ago
  Sorry that hurts your feelings but white households are much more rich than black households. According to the federal reserve, both mean and median net worth of black families are under 15% of the mean and median net worth of white families: https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.html https://www.federalreserve.gov/econres/notes/feds-notes/rece... If you force start ups founders into dire financials situations, those who can afford it are way more likely to be white than black. That's why 75% of start up founders are white. Still not sure how skin color has to do with the topic?
  - mytailorisrich 6y ago
    It's not a childish question of hurt feelings. This is bringing race into a discussion where it does not belong, this is perpetuating racial bias and racial discrimination. Your comment does the same. I have flagged the original comment because I think this has no place on HN or anywhere.
    - cultus 6y ago
      Pretending that racial inequities don't exist perpetuates racial bias. I can tell this is a topic you have never thought deeply about.
  - deleted 6y ago
    [deleted]
_curious_ 6y ago
"You're going to end up with a bunch of rich white dudes as founders (because very, very obviously the other way that people can afford to take smaller checks is if they have a lot of money in the bank)." There are many founders of various social identities who are not rich yet have managed to succeed with bootstrapping or small seed/accelerator investments because they are capable. To assert that some people are inherently advantaged or disadvantaged as founders and/or entrepreneurs based on such factors as race and gender is the definition of prejudice.
Blake_Emigro 6y ago
My understanding of it is that much of the money is supposed to be for Google and Facebook ads - something which I would never want to have to pay out of pocket for in the US market. So it's not just that the founders can pay themselves a ramen salary or better, but that there's a big early marketing budget built-in.
Spooky23 6y ago
IDK, in my observation as a working-class white dude, comfortable white people are less likely to start an entrepreneurial venture. Why take the risk when you have easier employment options? There were pretty obvious, observable backgrounds/personality types that were starting businesses in my circle. Mostly SMBs like trading/retail firms, personal services, etc. Well do to people assume that the masses are a bunch of hardscrabble foster children. Those folks exist. But the reality is that most people have families and have support systems to fall back on -- perhaps not as comfortable a fall-back as the kid where mom and dad are dentists or F500 executives, but not intolerable. Startups aren't really businesses, so maybe they are different. Optimizing for successful venture funding cycle is a different problem.
cryptonector 6y ago
If you have no capital to bring, then you will have no equity either unless you provide labor for free. Labor compensated with equity is capital, since you have to pay your living expenses out of savings or loans that you are liable for. And you'll just be an employee of sorts, except with less pay and more risk. Why bother? If you're unsure where your next meal is coming from, then you probably aren't currently a good candidate to be a founder. Maybe later you will be, but first things first: accumulate a bit of wealth. Venture capital isn't a government welfare program. You might get YC or others to pay a sort of a social tax by providing a sort of welfare, but the founders won't be owners (see above).
- awillen 6y ago
  Yeah, it's commonly known as sweat equity. You do the work, and other people provide the money, then you split up the equity accordingly to the relative value of the two different types of contributions (I mean that's oversimplying but it's generally accurate). If you're unsure where your next meal is coming from, you may still have a great idea and the ability to execute on it. If someone gives you enough money that you have the leeway to do those things, then everyone wins. Obviously venture capital isn't welfare... no one has begun to suggest that it is. VC puts money into companies in exchange for equity because those companies need money. If the companies didn't ever need money, there would be no need for VC. The idea that VC should only fund people who already have plenty of capital available to them fundamentally misunderstands the entire model.
  - cryptonector 6y ago
    Obviously VC exists because the founders don't have enough capital, but not because the founders have zero capital.
- cactus2093 6y ago
  The way YC currently works is something like $125k for 7% equity. So founders can pay themselves enough to live on and still own 93% of their company. This wasn't a hypothetical that the parent comment you're replying to made up. So whatever bizarre first-principles argument you're trying to make, which I am not really following, already doesn't match the current reality.
oyra 6y ago
Man... Diversity for the sake of diversity won't make anybody richer, just the opposite. The root of the 'diversity' movement is barbaric socialism, marxism. Marx, Lenin, Mao, Pol Pot all fought for disadvantaged working class; today's marxists fight for socioeconomically disadvantaged people, and they will gladly fake 'disadvantage' and attribute them to random group of people. The result of such fights will be similar to those achieved by Lenin, Mao, Pol Pot. What has to be ensured is an equal opportunity for everyone regardless of color, sex, religion etc. As of today, we have it in this country and in the most civilized capitalist world.
phkahler 6y ago
I think the money needs to cover your rent. It should not be enough to hire technical people to build the product - that was supposed to be the founders thing. In that light, SF is the wrong place because the rents are so high.
codegeek 6y ago
I think the financial argument is an interesting one. It is true that you need to be financial stable so that you can really focus on the startup BUT on the other hand, too much money can spoil you and you could end up burning the cash without lot of trial and error which can be useful starting up.
hinkley 6y ago
> rich white dudes Rich, young, socially connected, white, dudes. That's a full Bingo card.
kkolanm 6y ago
Completely agree with the point except the needless use of racial stereotyping on an economic issue. The reality is that millions of white people come from impoverished backgrounds. And millions of Indian, Asian, and yes even Black and Latino people are from wealthy backgrounds. Polices designed to help economic diversity will necessarily and disproportionately help certain racial minorities and that’s all for the good. If you want to actually help the world stop making it about race when it is not. And feel free to make it about race when it actually is.
- pedalpete 6y ago
  Diversity doesn't only mean race, it also means socio-economic backgrounds, which is what I think the original comment was referring too. But also, most of the data in VC does suggest that racial/gender diversity is seriously lacking.
jariel 6y ago
I would imagine that even the check sizes they offer still don't solve this problem.
santoshalper 6y ago
That's a great point, but I do think there is a legitimate counterpoint - that by shifting most of the risk from the founder (where $25-$100k is a lot of money) to the VC (where it ultimately is very little money) potentially eliminates a filter criteria and could create perverse incentives or lead to a scattershot approach. "I believe in this idea so much I am willing to gamble my short-term financial future on it" is a great way to find out what people really care about. The diversity issue is real though. As is the broader issue of wealthy people being able to take on much more risk than normal people, leading to a reinforcement cycle (winners keep winning) and a winner take all outcome. Which, now that I think about it, pretty much describes US capitalism perfectly.
bananaface 6y ago
People who take huge financial risks are IMO much more likely to be just kinda stupid than rationally confident & committed. It strikes me as a really dumb way of filtering for smart people.
michelpp 6y ago
I came here to say exactly this and I couldn't have said it better!
simonbarker87 6y ago
The financial purgatory expected by angels is ridiculous and one we never subscribed to and is far too much like a parent child relationship than an adult to adult relationship. Investors who want their founders in a tonne of personal debt and living on baked beans are hurting their investment and stroking their ego. Investors are trying to sell money, companies are selling a possibly enormous return on that money, it's a win-win and founders should be treated like the professionals they would be in industry. Start ups have basically unlimited upside risk for investors and totally limited (to the amount of money invested) downside risk for them (and in the UK very healthy tax breaks for investing), the founders on the other hand loose years building a product that may prove worthwhile, don't make them carry years of financial pain and repercussions because they tried to grow your $5-$100K.
foxtr0t 6y ago
Counterpoint: founding a startup and being financially secure isn't some inalienable right. As you point out, writing small checks will skew the population of founders, but by doing otherwise for the reasons you've brought up, you're addressing a symptom very inefficiently. It might be more effective to take an approach similar to affirmative action. I think the idea is totally valid. Pouring money into a small set of founders can have diversity implications as well, it's hard to guarantee you're distributing investment equitably if the batch size is small.
phamilton 6y ago
The other big difference on check sizes is that YC started during now documented collusion in silicon valley. Now, the check size really doesn't matter a ton to the FANG engineers looking for a sabbatical. Building a 100k cushion to fund said sabbatical is pretty easy when you're making 400k at Google. I think there's no real way for reducing checks to have meaningful impact at this point.
Thorentis 6y ago
> You're going to end up with a bunch of rich white dudes as founders Is there any reason you included "white"? Are black people not able to be rich, or are white people more interested in tech, or are black people discriminated against by YC, or... what?
norswap 6y ago
I agree with this point wholeheartedly, though I wish it could be made without making "rich white dudes" as some kind of slur.

dbbk 6y ago

Yeah I noped out of this as soon as I saw it. The guy is suggesting investing in startup founders but not giving them enough to live while they get that company off the ground. What is the point of that? Completely self-defeating.

czbond 6y ago
It is not YC’s job to support the company. That is the founders job. I’d suggest money supporting the company at seed diverts from a focus on monetary fit asap. $25k is enough to scrap by for enough months which should be the initial goal
- TomMarius 6y ago
  The problem is there are many brilliant people that can't just scrap by - with a mortgage and family. But I respect the VC's right to choose the kind of people they sponsor.
  - forbiddenvoid 6y ago
    Yeah, the idea of creating an environment that only favors young, privileged, unattached folks has always been pretty off-putting for me. Larger checks certainly attract the 'free sabbatical' folks that the author seems to dislike so much, but it also enables entire classes of potential founders to have access to capital that enables them to focus on their business rather than their kids' stomachs.
    - jasonwatkinspdx 6y ago
      It's why we've had a glut of startups doing lifestyle products that appeal to mid/late 20's bros with lots of disposable income. These... haven't been great startups as a generalization.
    - peterwoerner 6y ago
      Counterpoint. As a father of a baby, I have significantly less energy and time for work. With starting a company you tend to have to plow a ton of hours and energy into the endeavor, especially if you want to move at bottleneck speed. With the baby there are many weeks where I have a difficulty working a mere 40 hours. That being said, I have significantly more insight (due to experience) than I did when I was more free and willing to work 60+ hours a week and was willing to live off of 20k a year.
      - hkt 6y ago
        As a father of a 4 year old I don't think it is my job (or yours) to vet who gets the help they need when they decide they need it. You may not have felt you had the time and ability to commit, but why should you be able to speak for anyone but yourself?
        peterwoerner 6y ago
        Very valid.
      - kaitai 6y ago
        But that's the thing -- most successful businesses (as opposed to youthful adventures that paint one as 'innovative' on a resume) are started by older founders who have a depth of experience in their field. As parent of a 3-yr old, babyhood goes fast. You'll be sleeping & able to put in extra hours, if you wish, at some point. You'll also notice that your patience for bullshit has decreased, your patience with actual important shit has increased, and by the time the kids in their teens you might be ready to be a founder who doesn't do the hustle-grind-performative-dance and actually... creates a business.
  - czbond 6y ago
    Yep - that's life. It's called 'the choices we make close doors'. Responsibilities we take on, have repercussions. Founders with such obligations can work at home after their job like every other person starting a small business that is not tech. That way they have infinite runaway, and personal life stress, but not 'monetary stress'.
- whymauri 6y ago
  YC is an incubator, not a game show.
  - throwaway5752 6y ago
    Yes. They invest seed money. They help you turn an idea into a series A. Maybe it has lost it's soul because the round structures are so much looser, or the greater availability of angel money. Seed money used to be a godsend because you had a good idea that wasn't at a scale enough to interest traditional VC and you didn't know an angel. YC was particularly great because it had the emphasis on the network and the larger number of investments allowed it to distribute risk across the class. They purpose was not to build a company or make a good living, it allowed you to create a company you wouldn't have been able to, otherwise. I agree with the gp post, the goal is not to fund a sustainable company, it's to get one off the ground.
- save_ferris 6y ago
  No, it just diverts focus from building a successful company to figuring out how to eat. Forcing entrepreneurs to risk devastating personal bankruptcy just isn’t kosher, and there’s zero evidence that it creates healthy companies. It just encourages founders to take even more risks, which aren’t always ethical (i.e. Instacart’s predatory pricing and tipping model).
  - sushshshsh 6y ago
    While this strikes me as possibly true, maybe even probably true, I would prefer to see actual simple data about this. Sure it would be hard to get but here's the schema I imagine would be needed. Founder ID, Founder bank account balance average during company's first year, Founder health metrics array [acute visits to hospital or clinic for diet/mental health issues], Outcome of company --- If we notice that founders with low bank balances, lots of health events in their life, and unsuccessful business outcomes are popping up in the data, and then conversely founders with 100k in their personal bank on day 1 are never visiting the hospital and their companies are doing fine, then I think we could call check size a definitive contributing factor. This would fly in the face of "ramen profitability" as a virtue. EDIT: and i think there are enougg startups out there (40,000 probably??? ask crunchbase) to have a meaningful sample size
- jasonwatkinspdx 6y ago
  This is absolutely terrible advice. There are a few professional services that can have a dramatic impact on the early success of a startup. You need the best PR firm you can get to return your calls. That ain't cheap, but it has a rather huge impact if used properly.
  - _curious_ 6y ago
    "You need the best PR firm you can get to return your calls." Saying someone "needs" something (ie paid PR) in order to succeed could also be deemed terrible advice.
    - jasonwatkinspdx 6y ago
      This has been one of the critical differences between the startups I've worked at that have found successful exits and those that floundered. A good PR firm can you get a national audience for pennies compared to paying for ads.
      - _curious_ 6y ago
        I believe it, though there is plenty of opportunity for earned media - its not PR firm, ads, or nothing...
- bananaface 6y ago
  It's not about "who's job it is", it's about supply and demand. The founder could probably get a 300k salary at Google or a six-figure stipend with another investor. If Y-Combinator wants to compete they have to provide something that outweighs that.
  - cameronbrown 6y ago
    How is it YC's problem? The founder is choosing to start a company and asking YC for money. Clearly they're not short of startups on the supply side of their equation.
    - bananaface 6y ago
      You're not thinking about it the right way. It doesn't matter if they have "enough" applicants. They're trying to fill the positions with the best candidates out there - who they will just have to compete for. The more barriers they put up, the shittier the candidates they will get.
  - czbond 6y ago
    Why would Y comb need to compete with someone who is considering an offer to G? In that case, the founder would leave for the better deal anyways - so it's best to leave before it gets REALLY hard.
    - bananaface 6y ago
      Ok, but now you're filtering out a good chunk of people smart enough to work for G - so your applicant pool just got dumber.
      - czbond 6y ago
        Disagree. If someone's choice either is to work for G, or start the company, it is the founders risk to take and give up that job for the outsized risk and return of starting up. It is not YC's need to compensate a founder for their alternative.
seertaak 6y ago
> Yeah I noped out of this as soon as I saw it. I must be misunderstanding you; I read that as you stopped reading the entire thread because there was a single point you disagree with. Is that what you mean?
- klyrs 6y ago
  Suppose the first slide of my 10 minute sales deck described building a house out of literal waffles, and letting customers eat those waffles. Would you actually pay attention to the other 9 minutes? Overlooking the fact that if I attempted such a thing it would be amusing as hell. Imagine somebody taking that idea very seriously.
  - CalChris 6y ago
    Waffle House exists [1] and so this sounds likes like a buried lede which is way better than most pitches. I've heard worse, much worse. [1] https://www.wafflehouse.com/ https://www.wafflehouse.com/
    - tedivm 6y ago
      There's a difference between "sells waffles" and "constructions a house using waffles as the building material", and I'm reasonably sure the second one doesn't exist.
      - sjm-lbm 6y ago
        I feel like the point is "you never know when an apparently crazy idea will turn into something reasonable, so you should always stick with someone until the end of their pitch and/or point." Admittedly, I'm not sure that's universally true (we all have a limited amount of time, and it's reasonable to focus that time in places where it is going to give us the most benefit), but I'm pretty sure I see where the commenter is coming from.
        bananaface 6y ago
djsumdog 6y ago
I think back to Paul Graham's list of things that kill a startup: http://paulgraham.com/startupmistakes.html http://paulgraham.com/startupmistakes.html He does list having both too little money and too much money. I agree, maybe the $25k made sense back before life in California was more expensive than living in Manhattan, and it should be enough to cover more living expenses. Maybe alternatively, YC could provide less money, but basic housing and needs so founders minimals could be met, while also providing them a collaborative environment?
- KajMagnus 6y ago
  > basic housing What about a YC building complex a bit outside SF? Maybe one close to NY too, and ... two in Europe, two in ... each continent? :- ) "Ycplex"? "Hackerplex"? There could be a gym so people could stay healthy (and what about child care & school?).
Nasrudith 6y ago
I think the idea is to not be an "attractive nuisance" to get strung along by ideas which look good but don't work out. There is some theoretical strategic merit but it doesn't seem to synergize. It seems at odds with the Venture Capital model in the first place of rushing growth over profits and letting the wins make up for losses. Especially if he has a larger pool of capital than when he started (which he should unless he is doing it wrong), smaller checks /and/ wanting more personal attention and less canidates. That just cannot scale up to larger ammounts of money by definition, even if it would yield a better rate of return on investment in dollars. Diversification is another option for fund self-perpetuation but it will likely not have the same yields and cause total portfolio growth to decline with size. As for motivations I guess either trying to eat his cake and have it too.

site-packages1 6y ago

The solution may be wrong, but the idea is right. If people can just casually come into YC with no particular consequences for failure, that greatly reduced drive to succeed. "I'll just go back to FAMGAN after" or "I'll be able to transition from MBA grad + YC to something high paying" I don't think is great for success drive.

baq 6y ago
you can be motivated without going hungry. not being able to afford basic things is extremely stressful and takes time away from doing whatever YC wants them to do - that time is spent making sure that food is on the table. exactly the opposite of what you intend.
- throwawayway9 6y ago
  Well said, I don't believe it is beneficial increase a person's anxiety to extreme levels just because some people think that makes them work harder.
  - _curious_ 6y ago
    For some founders & entrepreneurs, it forces them to work smarter - not necessarily harder - and that's the goal, to figure out what isn't working right and change it to reduce/eliminate the anxiety caused by an under-performing startup.
- czbond 6y ago
  Yes - but this is what every company does at founding. Get really lean, survive on whatever it can. Founders should expect company building to be a nervous and anxiety inducing endeavor for 7 years. It is incredibly painful - and not for those who see it closer to a paid sabbatical
  - forbiddenvoid 6y ago
    If that logic were true, then there would be far fewer companies built by founders who already have a successful exit. The success of a company is far more likely to be correlated by the founders not having to put their own wellbeing on the line than the other way around. I think, as a point of failure, that most would agree that a system that allows a few people a 'free sabbatical' but also provides security for those founders who would not succeed without it, but who will with it is a good thing.

relaunched 6y ago

They are doubling down on what works. I'd be very interested to learn if Ycombinator has diversity and inclusion as a value and if they discussed what smaller checks might mean on D&I. It's interesting how the best incubator found that smaller checks out of the gate is beneficial, but you can raise a 30-50 million series B and founders can take a few million off the table, which is also good, so they can go long.

Alex3917 6y ago

It also doesn't make any sense from an investment perspective. Reddit would have been one of the most successful YC companies of all time, except for that they basically had to shut down because they couldn't raise money. This happened to lots of early YC companies that could have otherwise been successful. Had Reddit not sold for pennies on the dollar to Conde Nast, that alone would have probably paid for the extra 100k for every YC startup since.

awillen 6y ago
Great point. People think a willingness to take extreme financial risks is somehow a useful personality trait when it comes to entrepreneurship because of selection bias. People who take that risk and make it tell that story. People who take that risk and don't make it aren't heard from. People who don't take that risk also aren't heard from. There are lots of people with great ideas and the ability to execute on them who also have a deep sense of financial responsibility that precludes them from going 50k into credit card debt.
- mgkimsal 6y ago
  > People who take that risk and don't make it aren't heard from when you do, it's often quite heartbreaking. have read a few online, and knew one personally - kept going in to further debt, ended up getting divorced and creating a huge rift in his family, etc.
- CerealFounder 6y ago
  It's all just legacy from the insane power dynamic that comes from a relatively broke entrepreneur and an investor with money. The only thing that seems to stem true about the myth about "founders should be paid too much" is that when you suddenly have more resources than you ever had, you tend to be exposed to new distractions.
- sangnoir 6y ago
  And often, getting credit card debt is not a material risk, but a minor embarrassment when they ask their family to bail them out and/or move in the guest house for a few months, rent-free. When poorer folk take the "same" risk, they can be ruined for decades.

doorstar 6y ago

We have a silicon valley success story in our family. His parents were telling me how he built everything up out of nothing, clearly unaware of their own contribution. He could pour all his money into his start-up because if he'd lost every dime he could have moved back in with them. He'd have his own bedroom, bathroom, and a fresh-cooked meal every night. He could have stayed with them as long has he wanted. Very few people have that kind of soft-landing.

pal_9000 6y ago
Exactly what i wanted to post. Also excludes everyone who is married or has to feed their family.
Jommi 6y ago
I don't know think this is as clear. Can you link me to some researcher where a stronger social net leads to better entrepreneur outcomes? Because looking at country level data, USA, with it's terribly scary and risky path of entrepreneurship completely outperforms welfare state countries like the Nordics. You could say the difference is from capital markets, but still even the difference in startups that are not successes is humongous.
- btilly 6y ago
  Do you have statistics demonstrating that, per capita, the USA outperforms Nordic countries on entrepreneurship? I don't either way. But I have run across the counterintuitive fact that Nordic countries outperform the USA on how many people per capita are worth at least $30 million. And at least some of them got there through entrepreneurship.
  - djhn 6y ago
    Can't ignore old money. Nordics (most obviously Sweden and Denmark), Baltics (Lithuania) and many CEE countries (Poland) have hundreds of old aristocratic families with family trees two to four times as old as the US.
- 6y ago

gorpomon 6y ago

Agree-- the idea that limited means "always" fosters resourcefulness is a gross sentiment that has long been debunked. For many folks limited means just means extra stress with no added chances of success. Maybe the founder saying this is motivated by less money, but most people aren't and this would just further limit diversity.

yters 6y ago

Maybe the point of economic filtering is to only accept single young men, who can devote every waking moment to their startup without any concern for dependents and such. You can get great velocity from such a pool. Myself, with family, mortgage, etc. I would never be able to achieve that kind of velocity if I were accepted to YC. So, even if I had incredible ideas, as people around here keep saying, and PG makes clear in his Viaweb essay, it is not about the ideas but about execution. Thus, the economic filtering for those who are unencumbered and thus can really execute on their idea or something that YC comes up with makes a lot of sense.

Jommi 6y ago
I don't understand this point. Do you think anyone at any life situation should have equal opportunity of becoming a successful entrepreneur? You do realize that by having a family and owning a house, you're pretty much on a completely different financial and stability level than a single young male.
- yters 6y ago
  I am just saying the small grant makes a lot of sense from the YC worldview. And, if someone has family, house, etc. to provide stability do they need YC financial assistance?
  - jfk13 6y ago
    Family and house do not necessarily provide stability; they may just provide added responsibilities. I can't feed my house to my kids.
    - yters 6y ago
      That's why farming was the original startup!
treis 6y ago
>Maybe the point of economic filtering is to only accept single young men, who can devote every waking moment to their startup without any concern for dependents and such. Maybe I am missing something here, but why can't women do that too?

mytailorisrich 6y ago

> white dudes Not sure what skin colour has to do with the topic. Could we stop assigning racial etiquettes and discriminating based on skin colour? Not to mention racial stereotypes in this case.

Pelic4n 6y ago
Sorry that hurts your feelings but white households are much more rich than black households. According to the federal reserve, both mean and median net worth of black families are under 15% of the mean and median net worth of white families: https://www.federalreserve.gov/econres/notes/feds-notes/recent-trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-consumer-finances-20170927.html https://www.federalreserve.gov/econres/notes/feds-notes/rece... If you force start ups founders into dire financials situations, those who can afford it are way more likely to be white than black. That's why 75% of start up founders are white. Still not sure how skin color has to do with the topic?
- mytailorisrich 6y ago
  It's not a childish question of hurt feelings. This is bringing race into a discussion where it does not belong, this is perpetuating racial bias and racial discrimination. Your comment does the same. I have flagged the original comment because I think this has no place on HN or anywhere.
  - cultus 6y ago
    Pretending that racial inequities don't exist perpetuates racial bias. I can tell this is a topic you have never thought deeply about.
- deleted 6y ago
  [deleted]

_curious_ 6y ago

"You're going to end up with a bunch of rich white dudes as founders (because very, very obviously the other way that people can afford to take smaller checks is if they have a lot of money in the bank)." There are many founders of various social identities who are not rich yet have managed to succeed with bootstrapping or small seed/accelerator investments because they are capable. To assert that some people are inherently advantaged or disadvantaged as founders and/or entrepreneurs based on such factors as race and gender is the definition of prejudice.

Blake_Emigro 6y ago

My understanding of it is that much of the money is supposed to be for Google and Facebook ads - something which I would never want to have to pay out of pocket for in the US market. So it's not just that the founders can pay themselves a ramen salary or better, but that there's a big early marketing budget built-in.

Spooky23 6y ago

IDK, in my observation as a working-class white dude, comfortable white people are less likely to start an entrepreneurial venture. Why take the risk when you have easier employment options? There were pretty obvious, observable backgrounds/personality types that were starting businesses in my circle. Mostly SMBs like trading/retail firms, personal services, etc. Well do to people assume that the masses are a bunch of hardscrabble foster children. Those folks exist. But the reality is that most people have families and have support systems to fall back on -- perhaps not as comfortable a fall-back as the kid where mom and dad are dentists or F500 executives, but not intolerable. Startups aren't really businesses, so maybe they are different. Optimizing for successful venture funding cycle is a different problem.

cryptonector 6y ago

If you have no capital to bring, then you will have no equity either unless you provide labor for free. Labor compensated with equity is capital, since you have to pay your living expenses out of savings or loans that you are liable for. And you'll just be an employee of sorts, except with less pay and more risk. Why bother? If you're unsure where your next meal is coming from, then you probably aren't currently a good candidate to be a founder. Maybe later you will be, but first things first: accumulate a bit of wealth. Venture capital isn't a government welfare program. You might get YC or others to pay a sort of a social tax by providing a sort of welfare, but the founders won't be owners (see above).

awillen 6y ago
Yeah, it's commonly known as sweat equity. You do the work, and other people provide the money, then you split up the equity accordingly to the relative value of the two different types of contributions (I mean that's oversimplying but it's generally accurate). If you're unsure where your next meal is coming from, you may still have a great idea and the ability to execute on it. If someone gives you enough money that you have the leeway to do those things, then everyone wins. Obviously venture capital isn't welfare... no one has begun to suggest that it is. VC puts money into companies in exchange for equity because those companies need money. If the companies didn't ever need money, there would be no need for VC. The idea that VC should only fund people who already have plenty of capital available to them fundamentally misunderstands the entire model.
- cryptonector 6y ago
  Obviously VC exists because the founders don't have enough capital, but not because the founders have zero capital.
cactus2093 6y ago
The way YC currently works is something like $125k for 7% equity. So founders can pay themselves enough to live on and still own 93% of their company. This wasn't a hypothetical that the parent comment you're replying to made up. So whatever bizarre first-principles argument you're trying to make, which I am not really following, already doesn't match the current reality.

oyra 6y ago

Man... Diversity for the sake of diversity won't make anybody richer, just the opposite. The root of the 'diversity' movement is barbaric socialism, marxism. Marx, Lenin, Mao, Pol Pot all fought for disadvantaged working class; today's marxists fight for socioeconomically disadvantaged people, and they will gladly fake 'disadvantage' and attribute them to random group of people. The result of such fights will be similar to those achieved by Lenin, Mao, Pol Pot. What has to be ensured is an equal opportunity for everyone regardless of color, sex, religion etc. As of today, we have it in this country and in the most civilized capitalist world.

phkahler 6y ago

I think the money needs to cover your rent. It should not be enough to hire technical people to build the product - that was supposed to be the founders thing. In that light, SF is the wrong place because the rents are so high.

codegeek 6y ago

I think the financial argument is an interesting one. It is true that you need to be financial stable so that you can really focus on the startup BUT on the other hand, too much money can spoil you and you could end up burning the cash without lot of trial and error which can be useful starting up.

hinkley 6y ago

> rich white dudes Rich, young, socially connected, white, dudes. That's a full Bingo card.

kkolanm 6y ago

Completely agree with the point except the needless use of racial stereotyping on an economic issue. The reality is that millions of white people come from impoverished backgrounds. And millions of Indian, Asian, and yes even Black and Latino people are from wealthy backgrounds. Polices designed to help economic diversity will necessarily and disproportionately help certain racial minorities and that’s all for the good. If you want to actually help the world stop making it about race when it is not. And feel free to make it about race when it actually is.

pedalpete 6y ago
Diversity doesn't only mean race, it also means socio-economic backgrounds, which is what I think the original comment was referring too. But also, most of the data in VC does suggest that racial/gender diversity is seriously lacking.

jariel 6y ago

I would imagine that even the check sizes they offer still don't solve this problem.

santoshalper 6y ago

That's a great point, but I do think there is a legitimate counterpoint - that by shifting most of the risk from the founder (where $25-$100k is a lot of money) to the VC (where it ultimately is very little money) potentially eliminates a filter criteria and could create perverse incentives or lead to a scattershot approach. "I believe in this idea so much I am willing to gamble my short-term financial future on it" is a great way to find out what people really care about. The diversity issue is real though. As is the broader issue of wealthy people being able to take on much more risk than normal people, leading to a reinforcement cycle (winners keep winning) and a winner take all outcome. Which, now that I think about it, pretty much describes US capitalism perfectly.

bananaface 6y ago

People who take huge financial risks are IMO much more likely to be just kinda stupid than rationally confident & committed. It strikes me as a really dumb way of filtering for smart people.

michelpp 6y ago

I came here to say exactly this and I couldn't have said it better!

simonbarker87 6y ago

The financial purgatory expected by angels is ridiculous and one we never subscribed to and is far too much like a parent child relationship than an adult to adult relationship. Investors who want their founders in a tonne of personal debt and living on baked beans are hurting their investment and stroking their ego. Investors are trying to sell money, companies are selling a possibly enormous return on that money, it's a win-win and founders should be treated like the professionals they would be in industry. Start ups have basically unlimited upside risk for investors and totally limited (to the amount of money invested) downside risk for them (and in the UK very healthy tax breaks for investing), the founders on the other hand loose years building a product that may prove worthwhile, don't make them carry years of financial pain and repercussions because they tried to grow your $5-$100K.

foxtr0t 6y ago

Counterpoint: founding a startup and being financially secure isn't some inalienable right. As you point out, writing small checks will skew the population of founders, but by doing otherwise for the reasons you've brought up, you're addressing a symptom very inefficiently. It might be more effective to take an approach similar to affirmative action. I think the idea is totally valid. Pouring money into a small set of founders can have diversity implications as well, it's hard to guarantee you're distributing investment equitably if the batch size is small.

phamilton 6y ago

The other big difference on check sizes is that YC started during now documented collusion in silicon valley. Now, the check size really doesn't matter a ton to the FANG engineers looking for a sabbatical. Building a 100k cushion to fund said sabbatical is pretty easy when you're making 400k at Google. I think there's no real way for reducing checks to have meaningful impact at this point.

Thorentis 6y ago

> You're going to end up with a bunch of rich white dudes as founders Is there any reason you included "white"? Are black people not able to be rich, or are white people more interested in tech, or are black people discriminated against by YC, or... what?

norswap 6y ago

I agree with this point wholeheartedly, though I wish it could be made without making "rich white dudes" as some kind of slur.