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I think if you get over the drama here and implied "dirtiness", the main result is still a bit interesting. Even if you exclude the implied carteling and take

I think if you get over the drama here and implied "dirtiness", the main result is still a bit interesting. Even if you exclude the implied carteling and take everything he said with a grain of salt, the outcomes of this incentive structure are clear: once SV (i.e. the YC centered VC machine) gets into a space and has a main horse, SV can no longer incubate new innovation/competition in the space. It can also very likely become predatory to the potential innovators that SV is supposed to support. At a more macro scale, this means that YC will fade in the same way as everything else does because it won't be able to entertain a wave of innovators, and they will, as he did, seek and build the next SV.

mushufasa 5y ago
> the outcomes of this incentive structure are clear Yes, I think the incentive argument is certainly the more interesting piece than the notion that there is any sort of coordinated conspiracy, which seems far-fetched. > At a more macro scale, this means that YC will fade I'm not sure that this follows. This argument doesn't really apply to new approaches, it only applies to direct competitors of market-dominant darlings, not fresh approaches within a vertical.
dang 5y ago
If that's the main result of the post, then it's a reductio, because YC funds competitors all the time and would never turn down an innovator for anti-competitive reasons—only because they thought it wouldn't be a good investment at that moment. Anything else would both be bad for YC's business and against its principles (https://www.ycombinator.com/principles/ https://www.ycombinator.com/principles/). Of course it still happens that YC turns down good companies which go on to innovate and succeed—but only by mistake. Edit: by "principles" I don't mean some sort of moral edict, I mean YC's investment thesis, which is described at https://www.ycombinator.com/principles https://www.ycombinator.com/principles.
- parhamn 5y ago
  I find this comment surprising. I didn't say anything too controversial. Investors regularly refuse (and it's often the morally correct thing to do) investments in competitors. It's also often in their financial incentive too. To assume any investment organization in broad does differently because of their stated principles is absurd. Most investors would comfortably say this. > YC funds competitors all the time and would never turn down an innovator for anti-competitive reasons While I know your intentions weren't bad, it feels disingenuous to speak so confidently about the behavior of hundreds(?) of investors/employees, regardless of the take. Also getting a seed check from YC doesn't really disprove any of this. The forces of the business immune system he's describing probably wouldn't kick in until later anyway. To be clear I don't think any of this is abnormal behavior (or reprehensible). Regardless I stand by my bet: the successor to Airbnb & Stripe probably wont be YC backed.
  - deleted 5y ago
    [deleted]
  - rattray 5y ago
    YC is indeed different from VCs in this regard. VCs generally don't fund direct competitors to those in their portfolio, which I agree with you is a good thing -- conditional on there being a lot of VCs out there (which there are). (Btw, in case any reader is not aware, dang is employed by YC to manage HN - and YC acts differently from VCs in many respects).
  - nus07 5y ago
    With all due respect there have been 2-3 HN posts in the last few months about YC and HN being biased towards Stripe. Surely it cannot be so much smoke without a fire.
    - dang 5y ago
      That's bad logic in two ways. First, this is the internet. Smoke goes a lot further than that. Second, to the extent that the claims involve HN, (I'm being careful only to comment on facts I personally know about), they're definitely false [1]. So yes, for sure there can be that much fireless smoke. [1] I haven't had a chance to respond properly about those claims yet. Normally I'd have done it by now, but I'm on my phone with intermittent access at the moment, so am a lot slower and don't have my usual tools. Edit: I finally got it out - https://news.ycombinator.com/item?id=30070287 https://news.ycombinator.com/item?id=30070287.
      - dotcoma 5y ago
        dang, imho you’re trying too hard.
        dang 5y ago
        Sorry, but if someone makes statements about HN or YC that I know to be false, I believe it's my job to correct them—especially since we can't treat this kind of post in the way we normally moderate HN (https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20moderate%20less%20%22not%20more%22%20yc&sort=byDate&type=comment https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...). What do you think I should do instead?
- magicjosh 5y ago
  Curious about the funding competitors part. What enables YC to do this, why aren't other VCs able to fund competitors? Has this ever resulted in conflicts or lawsuits between companies? Lots of questions appreciate any insights.
  - ilrwbwrkhv 5y ago
    Disruption
- coldtea 5y ago
  >Anything else would both be bad for YC's business and against its principles Well, "bad for business" is arguable, but it's not like "against its principles" has been any big detterent in Google, Apple, Microsoft, and generally coporate behavior...
  - dang 5y ago
    YC is orders of magnitude smaller. So far, from what I've seen, those principles still carry some weight. Edit: I think I might have confused things by using the word 'principles'. I'm talking about YC's investment thesis, as explained here: https://news.ycombinator.com/item?id=30070101 https://news.ycombinator.com/item?id=30070101.
- log4shelled 5y ago
  Creating a cartel is "bad for business"? Are you sure about that?
  - dang 5y ago
    Turning down good deals is bad for a startup investment business, yes. In fact it's the worst mistake such a business can make. This observation is so commonplace that it's long been a cliché.
    - user_named 5y ago
      dang, this is a bad faith argument.
  - astrange 5y ago
    Every member of a cartel is motivated to defect, yes. The hiring cartel Facebook broke wasn't for business reasons, it was because Steve Jobs was mad about recruiters calling his people.
- KptMarchewa 5y ago
  >Anything else would both be bad for YC's business and against its principles Come on. It's like saying crime won't happen because it's illegal.
  - dang 5y ago
    I think the word 'principles' is leading to a bit of confusion here. I used that word because I was referencing https://www.ycombinator.com/principles https://www.ycombinator.com/principles, but I don't mean moral precepts, I mean YC's investment theses. These, for example: "Y Combinator’s goal is to cause there to be more startups, by helping founders to start them." "YC’s value is the number of startups we help times how much we help them." The point is that funding new startups in the same markets as previous startups it funded is a consequence of YC's model. Not to do it would be self-contradictory.
    - user_named 5y ago
      This sort of thinking reminds me of the efficient market hypothesis.
- shafyy 5y ago
  The Twitter thread and OP didn't say anything about YC investing in companies who do similar things. The "accusation" is that YC discourages other VCs from investing into competitors that YC isn't part of (for whatever reason).
  - dang 5y ago
    I was responding to the claim in https://news.ycombinator.com/item?id=30067382 https://news.ycombinator.com/item?id=30067382 that YC "won't be able to entertain a wave of innovators".
    - shafyy 5y ago
      Ok, but that doesn't change his argument. He's saying that as SV becomes less relevant, so will YC, because they are strung so tightly together. Not agreeing or disagreeing with this, just trying to point out this argument :-)
AYBABTME 5y ago
Then why did Lyft and Uber, Dropbox and Box, come from SV, from the same time period? I just pulled these from my brain with little recall, which tells me your argument probably has a lot of contradictory examples.
- sombremesa 5y ago
  The answer to this is probably FOMO (and it does work against GP's argument) — the VCs who missed out on the hot new startup will want to get on the second best rocket.
toast0 5y ago
Wait, I forgot which payment processor silicon valley liked? CyberCash, PayPal, Venmo (whoops), BrainTree or something, does Toast (but they're east coast, maybe not SV darlings) count? I like the name, clearly and they do process payments... Etc. There's a ton of companies in this space, and a lot of them got funding from somewhere.
wglb 5y ago
I know of at least one instance in which direct competitors were accepted to YC in the same batch. So your implication that SV can no longer incubate new innovation/competition in the space. is untrue.

mushufasa 5y ago

> the outcomes of this incentive structure are clear Yes, I think the incentive argument is certainly the more interesting piece than the notion that there is any sort of coordinated conspiracy, which seems far-fetched. > At a more macro scale, this means that YC will fade I'm not sure that this follows. This argument doesn't really apply to new approaches, it only applies to direct competitors of market-dominant darlings, not fresh approaches within a vertical.

dang 5y ago

If that's the main result of the post, then it's a reductio, because YC funds competitors all the time and would never turn down an innovator for anti-competitive reasons—only because they thought it wouldn't be a good investment at that moment. Anything else would both be bad for YC's business and against its principles (https://www.ycombinator.com/principles/ https://www.ycombinator.com/principles/). Of course it still happens that YC turns down good companies which go on to innovate and succeed—but only by mistake. Edit: by "principles" I don't mean some sort of moral edict, I mean YC's investment thesis, which is described at https://www.ycombinator.com/principles https://www.ycombinator.com/principles.

parhamn 5y ago
I find this comment surprising. I didn't say anything too controversial. Investors regularly refuse (and it's often the morally correct thing to do) investments in competitors. It's also often in their financial incentive too. To assume any investment organization in broad does differently because of their stated principles is absurd. Most investors would comfortably say this. > YC funds competitors all the time and would never turn down an innovator for anti-competitive reasons While I know your intentions weren't bad, it feels disingenuous to speak so confidently about the behavior of hundreds(?) of investors/employees, regardless of the take. Also getting a seed check from YC doesn't really disprove any of this. The forces of the business immune system he's describing probably wouldn't kick in until later anyway. To be clear I don't think any of this is abnormal behavior (or reprehensible). Regardless I stand by my bet: the successor to Airbnb & Stripe probably wont be YC backed.
- deleted 5y ago
  [deleted]
- rattray 5y ago
  YC is indeed different from VCs in this regard. VCs generally don't fund direct competitors to those in their portfolio, which I agree with you is a good thing -- conditional on there being a lot of VCs out there (which there are). (Btw, in case any reader is not aware, dang is employed by YC to manage HN - and YC acts differently from VCs in many respects).
- nus07 5y ago
  With all due respect there have been 2-3 HN posts in the last few months about YC and HN being biased towards Stripe. Surely it cannot be so much smoke without a fire.
  - dang 5y ago
    That's bad logic in two ways. First, this is the internet. Smoke goes a lot further than that. Second, to the extent that the claims involve HN, (I'm being careful only to comment on facts I personally know about), they're definitely false [1]. So yes, for sure there can be that much fireless smoke. [1] I haven't had a chance to respond properly about those claims yet. Normally I'd have done it by now, but I'm on my phone with intermittent access at the moment, so am a lot slower and don't have my usual tools. Edit: I finally got it out - https://news.ycombinator.com/item?id=30070287 https://news.ycombinator.com/item?id=30070287.
    - dotcoma 5y ago
      dang, imho you’re trying too hard.
      - dang 5y ago
        Sorry, but if someone makes statements about HN or YC that I know to be false, I believe it's my job to correct them—especially since we can't treat this kind of post in the way we normally moderate HN (https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20moderate%20less%20%22not%20more%22%20yc&sort=byDate&type=comment https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...). What do you think I should do instead?
magicjosh 5y ago
Curious about the funding competitors part. What enables YC to do this, why aren't other VCs able to fund competitors? Has this ever resulted in conflicts or lawsuits between companies? Lots of questions appreciate any insights.
- ilrwbwrkhv 5y ago
  Disruption
coldtea 5y ago
>Anything else would both be bad for YC's business and against its principles Well, "bad for business" is arguable, but it's not like "against its principles" has been any big detterent in Google, Apple, Microsoft, and generally coporate behavior...
- dang 5y ago
  YC is orders of magnitude smaller. So far, from what I've seen, those principles still carry some weight. Edit: I think I might have confused things by using the word 'principles'. I'm talking about YC's investment thesis, as explained here: https://news.ycombinator.com/item?id=30070101 https://news.ycombinator.com/item?id=30070101.
log4shelled 5y ago
Creating a cartel is "bad for business"? Are you sure about that?
- dang 5y ago
  Turning down good deals is bad for a startup investment business, yes. In fact it's the worst mistake such a business can make. This observation is so commonplace that it's long been a cliché.
  - user_named 5y ago
    dang, this is a bad faith argument.
- astrange 5y ago
  Every member of a cartel is motivated to defect, yes. The hiring cartel Facebook broke wasn't for business reasons, it was because Steve Jobs was mad about recruiters calling his people.
KptMarchewa 5y ago
>Anything else would both be bad for YC's business and against its principles Come on. It's like saying crime won't happen because it's illegal.
- dang 5y ago
  I think the word 'principles' is leading to a bit of confusion here. I used that word because I was referencing https://www.ycombinator.com/principles https://www.ycombinator.com/principles, but I don't mean moral precepts, I mean YC's investment theses. These, for example: "Y Combinator’s goal is to cause there to be more startups, by helping founders to start them." "YC’s value is the number of startups we help times how much we help them." The point is that funding new startups in the same markets as previous startups it funded is a consequence of YC's model. Not to do it would be self-contradictory.
  - user_named 5y ago
    This sort of thinking reminds me of the efficient market hypothesis.
shafyy 5y ago
The Twitter thread and OP didn't say anything about YC investing in companies who do similar things. The "accusation" is that YC discourages other VCs from investing into competitors that YC isn't part of (for whatever reason).
- dang 5y ago
  I was responding to the claim in https://news.ycombinator.com/item?id=30067382 https://news.ycombinator.com/item?id=30067382 that YC "won't be able to entertain a wave of innovators".
  - shafyy 5y ago
    Ok, but that doesn't change his argument. He's saying that as SV becomes less relevant, so will YC, because they are strung so tightly together. Not agreeing or disagreeing with this, just trying to point out this argument :-)

AYBABTME 5y ago

Then why did Lyft and Uber, Dropbox and Box, come from SV, from the same time period? I just pulled these from my brain with little recall, which tells me your argument probably has a lot of contradictory examples.

sombremesa 5y ago
The answer to this is probably FOMO (and it does work against GP's argument) — the VCs who missed out on the hot new startup will want to get on the second best rocket.

toast0 5y ago

Wait, I forgot which payment processor silicon valley liked? CyberCash, PayPal, Venmo (whoops), BrainTree or something, does Toast (but they're east coast, maybe not SV darlings) count? I like the name, clearly and they do process payments... Etc. There's a ton of companies in this space, and a lot of them got funding from somewhere.

wglb 5y ago

I know of at least one instance in which direct competitors were accepted to YC in the same batch. So your implication that SV can no longer incubate new innovation/competition in the space. is untrue.