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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

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.
  - jjeaff 6y ago
    It's also a privilege to even have a significant amount of unsecured credit available to you in the first place.
  - santoshalper 6y ago
    At least in the United States, we have a bankruptcy system that blunts the worst outcomes somewhat. Not sure that applies everywhere.
  - hpcjoe 6y ago
    Here here. When you empty your 401k to build your business, and don't contribute to it for 15 years while you are building, as you simply don't have the cash, and cannot afford it ... Yeah. The implicit assumptions of the "live in poverty" of the OP, are wrong. I'm 54, and I was financially wiped out at 51. I will not ever recover from this. No family wealth to fall back on. I do not believe I will ever be able to retire. And noting that there is a bit of ageism in this space, makes the threat of potential long term unemployment even worse for folks like me. Sort of an inverse Ozymandias. Gaze upon my flaming cratered company, and beware. Here be demons. That you cannot control. I had skin in the game. And I lost it.
    - jngreenlee 6y ago
      Have you blogged or told your story anywhere? I'm curious to learn more!
      - hpcjoe 6y ago
        Not all of it. I blog here[1]. The post where I talked about the end is here[2]. Note the 'laws' I quote at the end of the post. My first post is here[3]. There I talk about the HPC market, accelerators, and some of our plans. We were working on board level inexpensive accelerators before these were a thing. We gave up trying to get funding for this in 2006. I did say, you have to be at the right place, at the right time. And be lucky. We got 2 of 3. Luck eluded us. [1] https://scalability.org https://scalability.org [2] https://scalability.org/2017/03/requiem/ https://scalability.org/2017/03/requiem/ [3] https://scalability.org/2005/10/venture-capital-and-high-performance-computing/ https://scalability.org/2005/10/venture-capital-and-high-per...
- hpcjoe 6y ago
  As one who bootstrapped, took that risk, and lost ... everything ... I've been talking passively about this for a while. I speak with startups who have a product that is poorly differentiated, me-too like, that think they are going to take over the world. The reality, the vicious Darwinian reality, is that you and your team have to bust your collective rear-ends. And get lucky. Really, I hate to deflate many many bubbles, but being at the right place at the right time is often the deciding factor for success or failure. IMO moreso than the product, the product market fit, etc. You have to be seen as the sole provider of something the people deem important. Even if this isn't really true. You need influencers to drive carefully staged hype, and then you need to be able to convert small victories into evidence the hype is real. This is very ... very hard for bootstrapped companies, operating on shoestring budgets at best. The greatest lie ever told to entrepreneurs like me is "build a better mousetrap and the world will beat a path to your door." There is soooo much more than that. And the cost to you, financially, mentally, physically, will be huge. Not can be. Will be. If you are lucky, you will have a reasonable exit. Most of the time that doesn't happen.
  - sebiw 6y ago
    I understand what you say and I assume you have more experience than me in this field. But even if you fail, that's experience too. If you have a dream, I strongly encourage you to pursue it. It is usually more painful to look back in hindsight and one day wake up to a reality where you never even tried. To whoever is reading this: Try. Then try again. Then try another. And don't forget to look after yourself and your loved ones.
    - hpcjoe 6y ago
      There is a saying in karate. Fall down 7 times. Get up 8. But also, definitely, make sure you are not going to be financially destroyed by your actions. Take time to be with your family. Remain focused upon your life, and life goals. Do I regret my time building some of the insanest things in market (at the time)? No. It was an itch, I had to scratch.
      - 6y ago
swyx 6y ago
i had thought myself reasonably well informed on the Reddit story but this is surprising. you're saying if they had their 7% of the ~1-2b it wouldve paid for every YC startup since? but its not liquid...
- koolba 6y ago
  It’s also, AFAIK, never turned a profit. So unless they sold their stake to someone willing to gamble further, they wouldn’t have anything to show for the increased investment.
deleted 6y ago
[deleted]
jedberg 6y ago
> 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. I can't give details, but I can tell you that the $80K would not have made a difference. What would have made a difference was a small seed of a few million, which YC is pretty good at getting for companies these days.
- Alex3917 6y ago
  Yeah I mean in that specific example, it only works if you assume that Reddit would have had an extra few months to get more traction before raising the one round that they raised.
ponker 6y ago
How did the founders get so rich if they sold for pennies on the dollar to Conde Nast?
- count 6y ago
  Because they sold it for a Lot of Pennies.
nine_k 6y ago
Did Reddit have a monetization model? A working one?

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.
- jjeaff 6y ago
  It's also a privilege to even have a significant amount of unsecured credit available to you in the first place.
- santoshalper 6y ago
  At least in the United States, we have a bankruptcy system that blunts the worst outcomes somewhat. Not sure that applies everywhere.
- hpcjoe 6y ago
  Here here. When you empty your 401k to build your business, and don't contribute to it for 15 years while you are building, as you simply don't have the cash, and cannot afford it ... Yeah. The implicit assumptions of the "live in poverty" of the OP, are wrong. I'm 54, and I was financially wiped out at 51. I will not ever recover from this. No family wealth to fall back on. I do not believe I will ever be able to retire. And noting that there is a bit of ageism in this space, makes the threat of potential long term unemployment even worse for folks like me. Sort of an inverse Ozymandias. Gaze upon my flaming cratered company, and beware. Here be demons. That you cannot control. I had skin in the game. And I lost it.
  - jngreenlee 6y ago
    Have you blogged or told your story anywhere? I'm curious to learn more!
    - hpcjoe 6y ago
      Not all of it. I blog here[1]. The post where I talked about the end is here[2]. Note the 'laws' I quote at the end of the post. My first post is here[3]. There I talk about the HPC market, accelerators, and some of our plans. We were working on board level inexpensive accelerators before these were a thing. We gave up trying to get funding for this in 2006. I did say, you have to be at the right place, at the right time. And be lucky. We got 2 of 3. Luck eluded us. [1] https://scalability.org https://scalability.org [2] https://scalability.org/2017/03/requiem/ https://scalability.org/2017/03/requiem/ [3] https://scalability.org/2005/10/venture-capital-and-high-performance-computing/ https://scalability.org/2005/10/venture-capital-and-high-per...
hpcjoe 6y ago
As one who bootstrapped, took that risk, and lost ... everything ... I've been talking passively about this for a while. I speak with startups who have a product that is poorly differentiated, me-too like, that think they are going to take over the world. The reality, the vicious Darwinian reality, is that you and your team have to bust your collective rear-ends. And get lucky. Really, I hate to deflate many many bubbles, but being at the right place at the right time is often the deciding factor for success or failure. IMO moreso than the product, the product market fit, etc. You have to be seen as the sole provider of something the people deem important. Even if this isn't really true. You need influencers to drive carefully staged hype, and then you need to be able to convert small victories into evidence the hype is real. This is very ... very hard for bootstrapped companies, operating on shoestring budgets at best. The greatest lie ever told to entrepreneurs like me is "build a better mousetrap and the world will beat a path to your door." There is soooo much more than that. And the cost to you, financially, mentally, physically, will be huge. Not can be. Will be. If you are lucky, you will have a reasonable exit. Most of the time that doesn't happen.
- sebiw 6y ago
  I understand what you say and I assume you have more experience than me in this field. But even if you fail, that's experience too. If you have a dream, I strongly encourage you to pursue it. It is usually more painful to look back in hindsight and one day wake up to a reality where you never even tried. To whoever is reading this: Try. Then try again. Then try another. And don't forget to look after yourself and your loved ones.
  - hpcjoe 6y ago
    There is a saying in karate. Fall down 7 times. Get up 8. But also, definitely, make sure you are not going to be financially destroyed by your actions. Take time to be with your family. Remain focused upon your life, and life goals. Do I regret my time building some of the insanest things in market (at the time)? No. It was an itch, I had to scratch.
    - 6y ago

swyx 6y ago

i had thought myself reasonably well informed on the Reddit story but this is surprising. you're saying if they had their 7% of the ~1-2b it wouldve paid for every YC startup since? but its not liquid...

koolba 6y ago
It’s also, AFAIK, never turned a profit. So unless they sold their stake to someone willing to gamble further, they wouldn’t have anything to show for the increased investment.

deleted 6y ago

[deleted]

jedberg 6y ago

> 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. I can't give details, but I can tell you that the $80K would not have made a difference. What would have made a difference was a small seed of a few million, which YC is pretty good at getting for companies these days.

Alex3917 6y ago
Yeah I mean in that specific example, it only works if you assume that Reddit would have had an extra few months to get more traction before raising the one round that they raised.

ponker 6y ago

How did the founders get so rich if they sold for pennies on the dollar to Conde Nast?

count 6y ago
Because they sold it for a Lot of Pennies.

nine_k 6y ago

Did Reddit have a monetization model? A working one?