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Can we also talk about all the not-Airbnbs that PG silently nodded and winked with his teammates about? The ones that he's not as self-congratulatory about his

Can we also talk about all the not-Airbnbs that PG silently nodded and winked with his teammates about? The ones that he's not as self-congratulatory about his innate sense of who are "winners." Here's the sad truth: for every one hard-working, hard-cranking, in the right-place-at-the-right-time, never giving up "cockroach" companies like AirBnB that happen to make it, there are a hundred also hard-working, never-giving-up, never at the right-place-at-the-right time people with charisma who people look at and just say "why won't they just give up??" Because you can't spot an AirBnb out of a crowd of look-alike startups or pick the winner just by sensing the energy of the founder. Good products, great tech, great founders only get you so far on the crazy path of entrepreneurship. There's a million variables and factors that prevent you from successfully completing that path. There are the spectacular flameouts. The great founders with great tech who can't find market/fit. The iterators who can't make spaghetti stick to the wall. And no, not even a PG can spot that one survivor out of the batch of many, despite how much self-congratulatory survivor bias would say otherwise, even if he did indeed spot the winner from the get-go as he claims in this essay.

einarvollset 6y ago
I was in the batch with Airbnb. Every batch has practice demo days, and then everyone votes on most likely to succeed. Airbnb had like 3x the number of votes that number 2 had.
- wolco2 6y ago
  Did anyone else in your batch succeed?
  - einarvollset 6y ago
    Yep, obviously not to the same degree :)
- ackbar03 6y ago
  wow! what do you think made them standout so much?
  - einarvollset 6y ago
    I can only speak for myself, and it was a feeling of “oh this is a great idea”
    - ackbar03 6y ago
      Thats pretty fascinating. I think PG made it pretty clear that none of the VCs thought airbnb's idea had any potential at first, I guess somehow they managed to turn it around, at least within the YC cohort
      - einarvollset 6y ago
        Yeah I remember Chris Sacca at one of our Tuesday dinners saying something like “sorry guys, don’t do this, someone is going to get murdered” Which - to be fair - might have scuppered the company if it had happened early on by chance. Ps Chris was my favorite speaker - he’s the only one who made sure to tell everyone to chill out, take care of your health, sleep, etc.
        cercatrova 6y ago
        Sacca's response is interesting because it highlights something very cool about the gig economy: the commoditization of trust. People are actually far more benevolent than people think. The number of actual murderers and other miscreants is such a small number as to be negligible for the purposes of renting out your home, your car, getting food delivered to you, etc.
        dannyw 6y ago
        Part of this is because these companies associate individuals with their real world identities or credit card numbers. Uber does criminal and driving background checks.
        i_am_new_here 6y ago
        You could also argue that this was solved "along the way" and also not really clear back then. I am an AirBnB host myself and were also wondering about this recently and there are several factors today which contribute positively: Provided as a (technical) solution by AirBnB (Recommendations, IDs, etc.) but also how the internet/web evolved as a hole - A place that somehow manages that strangers meaningfully/safely interact with each other. This was never clear and also an uncertainty for Wikipedia (earlier) and now for AirBnB in a different and new way: Inviting strangers to your house.
jjeaff 6y ago
I suspect he knows as much. At least, from other writings, he seems to be self aware. But you have to remember that his business depends on raising money from people that must buy in to the myth that he does have that special ability to spot a winner on day one. Ironically though, successfully making people believe that you are able to pick winners actually does make the people you pick more likely to win. Being selected by YC not only allows you to raise truckloads of money more easily, it also gives you a boost when making connections or deals with other companies, hiring the best talent, etc.
aerosmile 6y ago
As someone who went through YC and met PG while he was still actively running it, I can tell you that at least in our batch he was 100% spot on about who was going to do well. He had a tendency to spend his free time with the same individuals who ended up doing phenomenally well. It would be easy to be dismissive about this and say something about doubling down on his best investments, etc. But during our batch many of those companies had not yet become the clear cut winners that they are today, and instead only turned into them a year or so down the road. One of the best companies from our batch is Flexport, and PG had been super impressed by Ryan Petersen even before he was officially accepted into YC [1]. It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range. I am not the only who figured this out - while this wasn't quite as much of a factor during my batch, nowadays there is an entire cottage industry of YC-only funds who invest only during YC demo days. As you can imagine, the way they differentiate from each other is by how much insider knowledge they are able to accumulate leading up to demo day (I am not implying that the partners ever leak anything, but these funds are very motivated and they look for all sorts of signals). One such signal is to track all other investors around you, and a well-connected angel can single-handedly increase the valuation of a startup (which explains why they manage to get in before demo day and at a discount). I have to say though - while the success rate of these YC-only funds is likely good enough to make them quite profitable, none of them come even close to what I observed with PG's ability to pick the winners (which makes sense, since a lot of other people have tried to build accelerators and none of them come even close to YC). [1] https://youtu.be/syoqjYLDs48?t=1169 https://youtu.be/syoqjYLDs48?t=1169
- sillysaurusx 6y ago
  It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range. That’s hilarious. Cheers! I never thought of a person’s movements as an investment signal, but in hindsight it certainly must’ve been.
helloycombinat 6y ago
> not even a PG can spot that one survivor out of the batch of many Whats PG?
SkyMarshal 6y ago
That's the incubator/VC model - spread enough little bets around that you land on a few winners that result in almost all of the fund's returns. And it's certainly possible that an experienced builder and investor like PG learns some heuristics and tricks along the way to increase the odds of landing on those few winners. That's basically what this article is about, recounting some of those of heuristics that led to YC investing in a startup whose idea they originally didn't even like. It's not about spotting that one survivor, it's about spreading enough bets with effective enough heuristics to ensure a high positive overall EV of the aggregate of all your bets.
edoloughlin 6y ago
https://en.wikipedia.org/wiki/Survivorship_bias https://en.wikipedia.org/wiki/Survivorship_bias "Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways. It is a form of selection bias"

einarvollset 6y ago

I was in the batch with Airbnb. Every batch has practice demo days, and then everyone votes on most likely to succeed. Airbnb had like 3x the number of votes that number 2 had.

wolco2 6y ago
Did anyone else in your batch succeed?
- einarvollset 6y ago
  Yep, obviously not to the same degree :)
ackbar03 6y ago
wow! what do you think made them standout so much?
- einarvollset 6y ago
  I can only speak for myself, and it was a feeling of “oh this is a great idea”
  - ackbar03 6y ago
    Thats pretty fascinating. I think PG made it pretty clear that none of the VCs thought airbnb's idea had any potential at first, I guess somehow they managed to turn it around, at least within the YC cohort
    - einarvollset 6y ago
      Yeah I remember Chris Sacca at one of our Tuesday dinners saying something like “sorry guys, don’t do this, someone is going to get murdered” Which - to be fair - might have scuppered the company if it had happened early on by chance. Ps Chris was my favorite speaker - he’s the only one who made sure to tell everyone to chill out, take care of your health, sleep, etc.
      - cercatrova 6y ago
        Sacca's response is interesting because it highlights something very cool about the gig economy: the commoditization of trust. People are actually far more benevolent than people think. The number of actual murderers and other miscreants is such a small number as to be negligible for the purposes of renting out your home, your car, getting food delivered to you, etc.
        dannyw 6y ago
        Part of this is because these companies associate individuals with their real world identities or credit card numbers. Uber does criminal and driving background checks.
        i_am_new_here 6y ago
        You could also argue that this was solved "along the way" and also not really clear back then. I am an AirBnB host myself and were also wondering about this recently and there are several factors today which contribute positively: Provided as a (technical) solution by AirBnB (Recommendations, IDs, etc.) but also how the internet/web evolved as a hole - A place that somehow manages that strangers meaningfully/safely interact with each other. This was never clear and also an uncertainty for Wikipedia (earlier) and now for AirBnB in a different and new way: Inviting strangers to your house.

jjeaff 6y ago

I suspect he knows as much. At least, from other writings, he seems to be self aware. But you have to remember that his business depends on raising money from people that must buy in to the myth that he does have that special ability to spot a winner on day one. Ironically though, successfully making people believe that you are able to pick winners actually does make the people you pick more likely to win. Being selected by YC not only allows you to raise truckloads of money more easily, it also gives you a boost when making connections or deals with other companies, hiring the best talent, etc.

aerosmile 6y ago

As someone who went through YC and met PG while he was still actively running it, I can tell you that at least in our batch he was 100% spot on about who was going to do well. He had a tendency to spend his free time with the same individuals who ended up doing phenomenally well. It would be easy to be dismissive about this and say something about doubling down on his best investments, etc. But during our batch many of those companies had not yet become the clear cut winners that they are today, and instead only turned into them a year or so down the road. One of the best companies from our batch is Flexport, and PG had been super impressed by Ryan Petersen even before he was officially accepted into YC [1]. It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range. I am not the only who figured this out - while this wasn't quite as much of a factor during my batch, nowadays there is an entire cottage industry of YC-only funds who invest only during YC demo days. As you can imagine, the way they differentiate from each other is by how much insider knowledge they are able to accumulate leading up to demo day (I am not implying that the partners ever leak anything, but these funds are very motivated and they look for all sorts of signals). One such signal is to track all other investors around you, and a well-connected angel can single-handedly increase the valuation of a startup (which explains why they manage to get in before demo day and at a discount). I have to say though - while the success rate of these YC-only funds is likely good enough to make them quite profitable, none of them come even close to what I observed with PG's ability to pick the winners (which makes sense, since a lot of other people have tried to build accelerators and none of them come even close to YC). [1] https://youtu.be/syoqjYLDs48?t=1169 https://youtu.be/syoqjYLDs48?t=1169

sillysaurusx 6y ago
It's pretty clear in hindsight that taking note of who PG was hanging out with was a very investable strategy. In fact, one of my batchmates had some money to put into other companies in our batch, and when he asked me for my opinion of who to invest in, that's exactly what I told him. I just did some quick math and would estimate that his ROI today is somewhere in the 1,000x range. That’s hilarious. Cheers! I never thought of a person’s movements as an investment signal, but in hindsight it certainly must’ve been.

helloycombinat 6y ago

> not even a PG can spot that one survivor out of the batch of many Whats PG?

SkyMarshal 6y ago

That's the incubator/VC model - spread enough little bets around that you land on a few winners that result in almost all of the fund's returns. And it's certainly possible that an experienced builder and investor like PG learns some heuristics and tricks along the way to increase the odds of landing on those few winners. That's basically what this article is about, recounting some of those of heuristics that led to YC investing in a startup whose idea they originally didn't even like. It's not about spotting that one survivor, it's about spreading enough bets with effective enough heuristics to ensure a high positive overall EV of the aggregate of all your bets.

edoloughlin 6y ago

https://en.wikipedia.org/wiki/Survivorship_bias https://en.wikipedia.org/wiki/Survivorship_bias "Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways. It is a form of selection bias"