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I have never read a business plan or balance sheet
- throwaway4good 5y agoHe obviously has got people working for him, that filters prospects before they get to him. I am sure they read both business plans and balance sheets.
- Oras 5y agoI wonder why it was surprising for some to read this tweet. Startups will change their priorities daily. Business plans are against the idea of running a startup.
- diego 5y agoProbably because many people who follow him on Twitter have no idea what running a startup is like, so they are imagining a completely different context. Business plans do make sense in other contexts.
- inerte 5y agohttps://apply.ycombinator.com/ https://apply.ycombinator.com/ is basically a business plan, isn't? Is it distinct enough to not be framed as such?
- themanmaran 5y agoYea I feel like the whole Twitter thread is just PG moving around goalposts on "What is a business plan" or "what is a balance sheet". I mean his article on "The Equity Equation"[1] seems to be written by someone who has read a balance sheet. [1]http://paulgraham.com/equity.html http://paulgraham.com/equity.html
- stale2002 5y ago> is basically a business plan, isn't? Is it distinct enough to not be framed as such? I don't think a "business plan" is literally just any words, written down, that are related to "business". It is likely a specific and defined thing.
- charcircuit 5y agoA business plan is a plan on what a business is going to do in the future. >What is your company going to make? This question is asking what your business is planning on making. Edit: This comment includes more relevant questions https://news.ycombinator.com/item?id=30319753 https://news.ycombinator.com/item?id=30319753
- blitzar 5y agoIt depends what your definition of is is. afaik there is no legislation defining a business plan. It might say business plan at the top, it might be a whitepaper, it might be a tweet. Make money, lots of money There we go, a business plan, its not a good business plan, nor a traditional one nor even a very comeplete one, but a plan nevertheless.
- rmbyrro 5y agoSeems related to Systems vs. Goals. [1] Biz plans and Balance Sheets are more associated with a goal-oriented mindset. PG's decision making obviously aligns more with a systems thinking. Founders are a major piece of a winning system to him, thus why he puts so much value in a 5-minute talk with them. [1] https://medium.com/@flaviorump/systems-vs-goals-a67fcd937370 https://medium.com/@flaviorump/systems-vs-goals-a67fcd937370
- doctor_eval 5y agoBalance sheets have nothing to do with goals. They show the financial state of the company. Including liabilities. Business plans are vague, balance sheets are very concrete.
- rmbyrro 5y agoIt's true that Cash Flow and Income Statement is used more often to assess financial goal achievement, but I don't think we can discard Balance Sheets. In my interpretation, "Balance Sheet" is being loosely used in this context for Financial Statements in general.
- ineedasername 5y agoI understand business plans, but balance sheets? It seems like you'd want to know the financial picture of a company. What else to you look at to, even at the most basic level, determine if the startup is going to be able to pay it's AWS bill and payroll that month?
- djbusby 5y agoperhaps the P&L? That's the bestest report (imo) of the business.
- shane_b 5y agoSoftware businesses have one balance sheet item: cash.
- bgroat 5y agoThat's not true. If my software company's treasury gains were realized it would make up almost a third of our revenue. Though I suppose a case could be made that this would make us a holding company with a cash-flowing SaaS, and not actually a "software company"
- shane_b 5y agoFair, investments too. That’s a recent trend.
- hncommenter13 5y agoI'm not sure what stage of company we're talking about here. I'd argue that for ALL companies, in any industry, working capital--measured on the balance sheet--is a critical data point. That is, you may be booking revenue but not collecting cash from your customers (in an extreme case, the "revenue" may be fictitious, if the software doesn't work and the customer refuses to pay). And while you might have $x of cash on the balance sheet, you could also have a huge and looming payables balance because you're waiting to pay your bills until you're N days past due. Also, revenue is just what you can actually book per the accounting standards, which has lots of specific tests for software companies. For most SaaS companies, a key number is also deferred revenue, a balance sheet item that records the difference between the cash you've collected (say, up-front for 12 months) and the remaining performance obligation to deliver software over the period. Or, if you have a big service component as part of your offering, a number to watch is the amount of revenue you've booked but not yet billed. As an investor, I'd also be curious about the future obligations of the company that will consume cash, such as big leases, debt, and other liabilities (eg, legal judgements against the company). Investors are free to ignore whatever information they'd like, I suppose. And a tiny two-person company probably has a very simple set of financial statements, if any. But those two founders have the ambition to build a big and successful company, I'd argue that understanding how to read financial statements with some mild degree of fluency just isn't that hard and is a very useful skill.
- gumby 5y agoI read them to see how people think. You can learn most of the same by talking to them. He didn’t say he doesn’t read the P/L, i.e. budget. Plus he has other ppl to read the balance sheets. I did a $20MM A round with $BIG_FIRM after associate asked for business plan and parter said “they sent it to us already” meaning just the Excel model. Which was a relief since I never write a BP suitable for public consumption, only internal use. But the excel model included all our assumptions for headcount, cap ex, op ex, regulatory and revenue so really what use was a narrative? (It worked out for them)
- smoyer 5y agoStatements like that will get you fired at Peloton.
- solveit 5y agoWell.. it would get you to fire yourself, I guess
- deleted 5y ago[deleted]
- meesterdude 5y agoA) I call BS on "never". It's one thing to not consider them, but another to say never ever. And what does that say if he's truly never even read one? B) This isn't something to be proud of, and certainly not something others should emulate. Ignorance isn't what makes you successful. (likewise, neither is millions of data points). c) Business plans and balance sheets are still very useful and applicable, and fair to say they aren't everything.
- yuliyp 5y agoI think they're very useful and applicable. But they are basically irrelevant to evaluating startups for YC. The stage those startups are at, the exact amount of money they have at that given point in time doesn't really affect anything; YC also has a standard "this is the implied valuation we'll fund you at" rather than actually evaluating the details of "what does the business look like now". Similarly, the business plan is also less relevant for evaluating a startup for YC: knowing what the founders are building and how they see it is what's relevant, not the details of market analysis and monetization strategy.
- deleted 5y ago[deleted]
- vincentmarle 5y agoSadly, being nuanced doesn’t get you the likes and retweets and follows.
- charcircuit 5y agoSo he's never read from anyone that Google monetizes search by displaying advertisements? He's never read anywhere how a company markets its products. How?
- KerrAvon 5y agoHe says he interrupts the founders during live presentations instead of reading balance sheets. Founder: So we’re doing this rad new architecture- Paulg: In Lisp. It’s in Lisp, right? Founder: Huh, fuck no, it’s 2022, dude- Paulg: (frowning) Out. Thumbs down.
- devoutsalsa 5y agoSadly, a predictable story Arc.
- tomhoward 5y agoWe interviewed in late 2008. Then as now, it’s a conversation not a presentation. We were using PHP/Symfony then (changed to Python/Django later) but he didn’t ask anything about what language or platform we were using. He did care a lot about the fact that we had users who were excited and unique insights into what was overlooked in the market.
- sillysaurusx 5y agoThanks for being the single datapoint of rationality in a sea of madness. It must be pretty surreal to read these comments as a founder. It certainly is for me, as someone who grew up with HN.
- RandyRanderson 5y agoIf Kim Kardashian started an ice creme company, she'd have a very good chance of succeeding. Let's say she starts a few more businesses and they are successful. Is Kim someone we should take business advice from? She is one of the richest self-made women ever. Kim would likely never have to make any ice creme either. Here's a pg speech. Make your own conclusions: https://www.youtube.com/watch?v=f4_14pZlJBs https://www.youtube.com/watch?v=f4_14pZlJBs
- newyankee 5y agoWe need to stop treating people as unfallible. I used to idolize so many people when young. I still respect a lot, but now I understand that everyone is human and everyone has differing motivations, especially people in power.
- user_named 5y agoThe ignorance-arrogance combine. Like bragging about failing math classes in middle school.
- roenxi 5y agoHe's probably exaggerating. But there isn't much point reading a start-up's balance sheet. It is signal-free.
- cm2012 5y agoConsidering PGs track record if investing in very early stage start ups (better than anyone else in the world), you should probably consider your own arrogance here.
- user_named 5y ago
- deleted 5y ago[deleted]
- ZhangSWEFAANG 5y agoThis is so aptly named. Is this a common naming?
- paulpauper 5y ago>Like bragging about failing math classes in middle school like bragging about failing at math and then succeeding hugely at something math-related
- stickfigure 5y ago...many times in a row.
- MattGaiser 5y agoFor what he is doing, biz plans and balance sheets are noise. Like testing the math skills of a real estate agent. Whether or not they failed in math probably won't impact the price they get for your house.
- vimy 5y agoNot even the Viaweb or YC balance sheet?
- invalidname 5y agoHe invests in seed rounds where those often go down the drain. The things that matter at this stage are: Founders and general market size. So sure, ignoring the noise of those two makes sense.
- tomhallett 5y agoPeople really struggle to recognize context. I assume most people who are getting so upset about pg’s tweet are reading it as “business plans are stupid. Balance sheets are stupid. No company should ever make one because no one should ever read it. Anyone who reads one is stupid.” It should be implied that his advice is only relevant the type of investing which pg does. pg tweeted later on that his solution is something he does in YC interviews. So his comments are obviously scoped to companies which would apply to YC.
- Negitivefrags 5y agoI founded a company without a business plan. Raised money without a business plan. Ran the business profitably for a long time and then sold the majority of it without a business plan. I don’t see the value in a formal business plan at all and so I would almost agree with your made up quote there. I mean obviously you need to have a plan for your business. But writing it down in some formal way seems like a waste of time. Perhaps there is value in writing one in order to coalesce your own thoughts if you are that way inclined, but it’s certainly not going to convince anybody of anything that wouldn’t be convinced by the conversation you would have instead.
- jfoster 5y agoRecording it in some form (written or otherwise) seems useful if you need to share it with lots of other people.
- iratewizard 5y agoYour last paragraph sounds the most correct to me. It's a drafting exercise that helps a person get a deeper understanding of the value added, the marketing of, the selling of, the delivering of and the financing of said value add. It's necessary for a business like a mind mapping diagram is necessary for an essay.
- LeonB 5y agoCan’t read what he says as I was blocked years ago. I had expressed the mildest degree of cynicism one can possibly express in response to a straight up lie.
- paulpauper 5y agoincognito mode
- rkagerer 5y agoNot the op, I don't have any bans, and I'm not normally signed in to Twitter. But a side note on UX here... When I land on this tweet the site takes long enough to annoy me before it loads the content (ie. everything below the "Log In / Sign Up" banner is delayed). When I scroll down past the first few tweets the whole page disappears and is replaced with a nag screen implying I can't see more without signing up and/or downloading the app. Pressing back once bumps me right out of the whole site (back to HN). The behavior is non-deterministic. It worked this way the first few tries (with varying quantities of tweets loaded before the nag screen took over). Then I tried in Incognito mode and it worked, and after that going back to the site without Incognito seemed to fare better (did Twitter finally figure out I don't want to download their app?) Seriously disheartened the majority puts up with this kind of horrible UX. As a content publisher, I don't want readers encountering friction preventing them from digesting my thoughts. As a consumer I want to see the content without hassles. The only party benefitted by their dark pattern is the platform. Not putting users first = opportunity for someone else to do it better and eventually displace your business. I used to respect Twitter engineers and was under the impression they cared about things like load times and user experience. Has the culture changed? Am I just getting old and grumpy?
- marklubi 5y agoWhat Twitter has been doing with blocking access without an account has reached the levels of being user hostile. It's like they're following the awful pinterest model. I find the URL that they call just before they block access to be interesting: https://twitter.com/i/api/1.1/onboarding/fatigue.json https://twitter.com/i/api/1.1/onboarding/fatigue.json Onboarding Fatigue
- paulpauper 5y agothat might work at the seed level but not when investing in the stock market obviously, at the early stage growth will matter more than the balance sheet
- thawaya3113 5y agoDoes this, however, mean that no one in PG’s employ or in contract with read a balance sheet? Because it makes complete sense that a balance sheet doesn’t tell you anything about how a business will do. But assuming it’s not falsified it helps identify red flags. I suspect any due diligence almost certainly has someone reading a balance sheet.
- marto1 5y ago
- ganeshkrishnan 5y agowhy do you think its bullshit? for startup companies that are looking for seed investments who writes business plans?
- themanmaran 5y agoThe YC application is effectively a business plan.
- deleted 5y ago[deleted]
- raverbashing 5y agoOh is it? Give it to an MBA to evaluate and they will come right back complaining about it. Guaranteed. And asking for a formal business plan with a detailed financial planning. So, yes, in practice for someone who are familiar with startups it is a business plan. For everybody else it's just a generic description.
- timcederman 5y agoI can assure you it is not anything like an actual business plan.
- mhh__ 5y agoI think it's pretty unlikely he never done either, let's be real.
- techfoolery 5y agoHow in the world is a tweet about funding methodology even close to outrageous content that tip toes into banishment? You're losing the plot, friend. It's simply a tweet to say he gets more value from talking directly with the founders about what he wants to know. Seems pretty reasonable to me, but I could see how a certain audience would say ** context and ignore to categorize it as "controversial edgy tweets". Easy to rile those people up though without challenging the algo.
- tlogan 5y agoThis really does not mean that you do not need a buesniess plan. You definitely need it. But in case of startups that should be only for you: not for investors. For investors you make a different version called pitch deck.
- ModernMech 5y agoHonestly the value of a business plan is just writing it, because it focuses your ideas and forces you to consider things you may not have considered before. Who cares if paulg reads it? It's a tool for founders, not investors (apparently).
- ohmanjjj 5y agoI have built a couple very successful SaaS businesses from scratch. 8 figure businesses. I have never in my life written a unit test or any kind of testing code in 20 years of professional software development.
- jollofricepeas 5y agoOver the last 15 years, I built a unicorn and sold it for more than a billion and half. We wrote unit tests extensively.
- Invictus0 5y agoClearly one of you must be wrong or lying
- ohmanjjj 5y agoMaybe if I had written unit tests my companies would also sell for over a billion
- CyanBird 5y agoOr both could be right
- jollofricepeas 5y agoBoth are likely ;) The idea that you need to throw unit testing out to be successful is kind of silly. When you’re growing a very complex system (huge micro services pattern and dealing with sensitive data) you’ll be happy you have tests to save your ass. …speaking from experience.
- rexstjohn 5y agoThis is probably meant to be, partially, in comparison to Warren Buffet, who famously claims to invest based on reading of financial statements (and other documents) in search of “good businesses.” https://www.amazon.com/Warren-Buffett-Interpretation-Financial-Statements/ https://www.amazon.com/Warren-Buffett-Interpretation-Financi... Suspect that both Buffet and Paul’s real methods rely heavily on instinct, context, relationship networks, combination potentials, personality and pattern matching which can’t be fully documented or quantified or imparted. I remember having a conversation with my brother once about a protein powder being recommended by some bodybuilder or another. His response: “Yes, he says that he looks that way because of this powder, but what does he actually do?” Answer: Steroids. Suspect the same is true of many great success stories in business.
- kova12 5y agoWarren Buffet is not investing in startups. There is a big difference between an established business and a startup, insofar that established business has already demonstrated its potential. In startup potential is unknown, yet it's all that it has to offer
- Barrin92 5y agothey fundamentally do different things. VC investors make money when a company goes public or is sold off, it's effectively a Keynesian beauty contest. Buffett tries to find companies that are long term viable.
- MattGaiser 5y agoOr all sorts of things you cannot publicly admit to without undermining your reputation. For example, say that you have a resume packed with awards. The secret to getting nominations for awards and scholarships is usually to write it yourself and send it to a friend/teacher/colleague for signature, not waiting around hoping that someone deems you worthy. As most wait for someone to deem them worthy, many awards are less competitive than they appear to be. But you could never admit to this, as it would devalue you in the eyes of others.
- unityByFreedom 5y agoWarren's conversations are also short though. The difference is he invests in mature companies. He studies their books, then asks the CEO a few questions. If he likes the answers he invests. It's rather different from investing in a startup. Plus all of YC's startups presumably receive some boost from exposure on HN and reddit.
- iamyatin 5y agoMe neither.
- benreesman 5y agoPG is a very, very bright guy and has left an outsized mark on the first two decades of 21st century consumer tech: his legacy is secure. I'll even grant that pre-A business plan decks are relatively low signal based on what I've seen. But to just toss out the idea that balance sheets and discounted cash flows should have any bearing whatsoever on the value of an equity is so friggin Bitcoin.
- alfiedotwtf 5y agoI've been reading a few Lean Startup books recently, and this morning I went to the local government's website to see what advice they could give to register and start a business... From all the Victoria Government's main business website and to all of their small business grant websites, all I could find was advice on how to write a business plan. This was in complete contrast to all the Lean books that not once talked about business plans but instead focused on customer development. ... maybe it's no wonder 9/10 of new businesses fail if they start with planning documents that take weeks vs "getting out of the building".
- Neverending 5y agoHe later goes on to claim he's "never read a pitch deck". https://twitter.com/paulg/status/1492696791434731529?s=20&t=ODbVDT_HQOWLtSqBsiWk1w https://twitter.com/paulg/status/1492696791434731529?s=20&t=... What an eye roll.
- nicodjimenez 5y agoI love the man's essays and he is clearly a genius, but he's getting carried away a bit on Twitter.
- cam0 5y agoClearly very smart, but I haven't heard or read anything from him that would classify as genius.
- s1artibartfast 5y agoFor what it is worth, The most common technical definition genius is an iq of 140, or 1/400.
- throw100g 5y agoI think that is an important fact to know considering the confusion in this thread. There are people commenting that pg surely can't be a genius because this or that he engages in isn't ethical (to them). But that's the thing, the IQ says absolutely nothing about ones ethical responsibility or the amount of empathy one has. It is purely measuring "logical thinking ability". Things like "continue this sequence", "recognize a pattern", etc. I also often see this dangerous assumption that ones political opponents or everyone with a different opinion than the one which seems most rational to ones own must be "stupid". In reality, the problem is that we focus on something as (arguably) unimportant as the IQ, which measures only something very narrow. Another misconception about IQ is that those who are more poor or have less favourable job positions must have a lower IQ. To give just one counter example to that, very often, people who have some sort of handicap (ASD, ADHD, etc.) are also "gifted", have a high IQ, are good when it comes to logical thinking. But their handicaps still make their lives more difficult in general, so they face more adversity than someone who is "normal". Sorry that i wrote a wall of text, was just thinking out loud. In my personal opinion, the IQ is already a little dangerous, because it assigns a "value" to a human life, but that is an entirely different discussion.
- nomilk 5y agoVery similar to Sam's confession on Econtalk [1]: > I probably shouldn't admit this--I'm on the Board of a public company: I can't read a balance sheet or income statement or anything like that. [1] https://www.youtube.com/watch?v=JAYXUgNHHc4&t=1656s https://www.youtube.com/watch?v=JAYXUgNHHc4&t=1656s
- jcrben 5y ago"Can't do arithmetic, that's for beancounters"
- spoonjim 5y agoThat’s why there are multiple people on a company board, but it’s also telling how narrative-driven rather than economics-driven the startup world is. It doesn’t matter if a company is hemorrhaging money as long as it fits in a good storyline.
- vasco 5y agoThat board oversight in silicon valley is largely a joke is no surprise, particularly because it is a joke everywhere else too. Still if this isn't just an inflammatory statement, which it probably is, it's showing how negligent you can be for very long if only you talk a good talk.
- nomilk 5y agoI agree he makes his point sharply, but I suspect he's probably asked weekly where he got his MBA, so mentioning that he can't even read a balance sheet is a fun way to show that boards aren't always a bunch of soulless accountants with MBAs; that in the case of YC, those aren't the critical skills; but instead being able to quickly assess an idea and the people around it is what matters.
- projektfu 5y agoThat’s a worse confession. I’m sure PG can read an income statement just fine and likely used his to sell ViaWeb. Looking at things like Uber, though, they’re coming up with ways of making these basic reports harder to read critically. It reminds me of the pre-SEC financials covered in “Security Analysis” by Benjamin Graham. Companies claimed all sorts of things, especially treating one-time events as operating revenue, and toed the line of fraud.
- psalminen 5y agoIt makes complete sense. I come from a geographic area where the immediate response to my job description is "here's my startup idea". There have been very few I feel passionate about and want to get involved. The rest I ask for a contract few and my counter is always $0 and a partnershie of ownership.
- deleted 5y ago[deleted]
- d--b 5y agoAren’t pitch decks condensed version of business plans? Just asking? Who has ever cared about balance sheets in the valley? The credit line is bottomless if you can show growth.
- softwarebeware 5y agoFailure to plan is planning to fail
- newbie789 5y ago[dead]
- theonething 5y agoHad to chuckle at this exchange down in the replies: > @ebecerra999: how do you approach Ikea furniture. > @paulg: Oregon Expressway, then 101. Not sure why they were asking about Ikea furniture.
- divbzero 5y agoThat is indeed the fastest route from El Camino to East Palo Alto.
- vincentmarle 5y agoViaweb's First Business Plan: http://paulgraham.com/vwplan.html http://paulgraham.com/vwplan.html
- notahacker 5y agoTbf, the idea that all they really needed was a faster Internet connection and a secure server because clients "may believe" that's a useful thing for credit card transactions does fit the don't judge a founder by his planning philosophy "Spending some money on advertising might also be a good idea"
- steelstraw 5y agoThat was fun to read. It was a different time: Secure server software ($5000). This does not seem to be an absolute necessity; there are a lot of sites on the web where you can send your credit card number unencrypted, and to date there have been no reports of the numbers being stolen. But catalog companies may believe that a secure link is necessary, and spending this $5000 would give Webgen a much more professional look.
- guynamedloren 5y agoI’m surprised the YC application hasn’t been more of a focus in this discussion. The following questions are pulled from the application (perhaps an older version): What is your company going to make? Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you're making? What's new about what you're making? What substitutes do people resort to because it doesn't exist yet (or they don't know about it)? Who are your competitors, and who might become competitors? Who do you fear most? What do you understand about your business that other companies in it just don't get? How do or will you make money? How much could you make? How far along are you? Do you have a beta yet? If not, when will you? Are you launched? If so, how many users do you have? Do you have revenue? If so, how much? If you're launched, what is your monthly growth rate (in users or revenue or both)? —- These questions cover product description, value prop, market analysis, financial projections and more, all of which are the core of a “business plan”. Sure, the application may be structured in a different way, but the sentiment that PG has never read a business plan seems very disingenuous.
- sillysaurusx 5y agoIf all business plans were as thorough and as revealing as YC’s application forces you to be, then YC would have called it one. But there’s a separate name for a business plan. Most are useless. I suspect pg is referring to the plans founders make to impress investors, rather than to figure out which problems to solve.
- jcrben 5y agoThis is all just semantic nonsense. YC has no more profound understanding of the noun "business plan" than anyone else in the business world. Don't overthink it
- nouveaux 5y agoTo be fair, there is a pretty concrete idea of what a traditional business plan looks like. Traditional business plans are needed if you want a small business loan from a bank. If you try to get a small business loan from the bank with a YC application, you'll get laughed out of the bank. A YC app is quite different from a business plan and most people would not see it as the same thing.
- Spamer1 5y ago
- known 5y ago
- mdoms 5y agoHow do people not see right through this guy?
- GoodJokes 5y ago
- thiscatis 5y agoWhat McAfee was to Crypto, pg is becoming that for startups, he should take a break from Twitter.
- IceDane 5y agoIt's like this guy is out to prove to everyone that he's an idiot. Which is honestly pretty convenient since it means a lot more coming from him.
- austenallred 5y agoSeems like a lot of people are missing the point of this one. PG/YC invest at the earliest stages. The information they need is pretty much: 1. What are you doing? 2. Do people like it? 3. How big is the market? 4. What are you/team like? Could you cover all of those in a formal business plan? Sure, but you can also do so in a short-form application that's 1/20 the length or in a 10-minute back-and-forth conversation. You don't have to ever view formal documents or financials to do that. That is PG's broader point, and isn't really that controversial IMO.
- ignoramous 5y agoGotcha. YC Continuity, otoh, surely evaluates go-to-market / business plan?
- austenallred 5y agoThere’s a difference between business plan and Business Plan, so to speak - a formalized document with a pretty standardized format you used to have if you, for example, wanted to get a loan from a bank. It’s mostly gone away, but there used to be endless arguments about whether a startup should have a formalized written business plan https://en.m.wikipedia.org/wiki/Business_plan https://en.m.wikipedia.org/wiki/Business_plan. Business schools taught all the MBAs to write them, and everyone used to argue about whether a startup ought to have them. Today I’m not aware of any VC or investor that requires/wants a Business Plan, almost everyone has settled on a standard pitch deck if anything (though one-page ‘memos’ are becoming a thing, and some investors even eschew those). A few business schools somehow still tell you to create a business plan if you want to raise VC. I invest in ~100 startups/yr and will see a handful of Business Plans sent to me, but not many. I don’t read any. YC Continuity today would likely look at a deck and definitely ask questions, but still wouldn’t require a Business Plan. PG probably wouldn’t ever even look at a deck.
- WisNorCan 5y agoWe worked with Continuity for our raise. PG was not involved. They definitely required balance sheet, income statement, financial forecasts etc. Much more than a deck and a one page memo. It all has to do with what stage you are raising at.
- dfabulich 5y agoThis tweet is saying that YC interviewers don't read balance sheets; he's not saying that all balance sheets are useless. (You need a balance sheet to file your taxes, for one thing!) As for business plans, the saying goes that "plans are useless, but planning is indispensable." Business plans are a particularly poor tool for having funding conversations; they're both less persuasive than a pitch deck and less helpful in helping funders decide whether to invest than simply interviewing the founders. But just because PG won't read your plan doesn't mean your startup shouldn't have/make a plan!
- inglor_cz 5y agoThis is a good take. Plans in war (and in business) tend not to survive first contact with the enemy, but planning is still useful.
- nouveaux 5y ago"But just because PG won't read your plan doesn't mean your startup shouldn't have/make a plan!" This is true not just for startups and its great advice for life in general. However, I believe YC would actively discourage founders from writing a traditional business plan. They would rather have their startups talk to users and building products. To put it another way, I think YC would say that you cannot possibly write a realistic business plan without a solid customer base and a good product. Anything else and you're just making things up. By the time you have customers and a good product, you don't need a business plan to raise funding. * This is what I've gathered from their startup school materials without having raised a dime from YC or talked to any of the partners, so take this with a big dash of salt.
- jimnotgym 5y agoPaulg's advice may be sound for companies at YC stage (ie not a company yet), but I would caution against it a general investment advice. To take his analogy further, if someone has run 10 marathons one might have a fair idea of the probable time for the next one.
- auggierose 5y agoI don't know what is controversial about that statement if you put it into pg's context. Anyone complaining about it surely could do something more productive with their time.
- twayt 5y agoIt reveals PG's MO. Which is to say edgy things at the expense of accuracy to attract attention. The reaction is not directed towards business plans or whether PG has even read one or not (hint: no one cares). It is about his consistently proven proclivity to say edgy, inaccurate things, often which add 0 value. Then get upset that people are pointing this out on twitter. It's pretty annoying that he acts this way on twitter considering his previous essays have been ogod.
- auggierose 5y agoIf his MO is to have fun watching small-minded idiots trying to misinterpret every word he says, then yeah, I guess the tweet does indeed reveal it.
- twayt 5y agoAny publicity is good publicity, the more small-minded idiots you can rouse, the more attention you get. Bonus points if you act like you're "surprised" (in pg's own words) by it and have a cynical comment to make about Twitter as a platform.
- reilly3000 5y agoDoes taking the time to write a business plan help one pass a 5 min PG interrogation?
- samwillis 5y agoMy understanding is Y Combinator was always about people, on both sides, it’s also far more than just PG. if you haven’t read it, read this that Paul wrote about Jessica Livingston, it’s a brilliant insight into how they invest and how important the people around PG are at informing their investment decisions: http://paulgraham.com/jessica.html http://paulgraham.com/jessica.html The point is he doesn’t make investment decisions based on a traditional business plan or balance sheets. That’s all he is really saying in his tweet, for a popper insight read that post. For someone known for his essays trying to convey meany from a 10 word tweet is never going to happen.
- thawaya3113 5y agoI don’t understand why it is now, a couple of years when a bunch of billionaires have basically become 5-10x richer, while the rest of the people in the world are suffering because of understandable economic restrictions, are these rich billionaires going out of their way to show that they really never deserved that money. They had no special insight. They had no special genius. In fact, we built an economic system that ensured wealth ended up with 1-2% of the population, and they happened to be the ones who lucked their way into the 1-2%. Like, I’m struggling to understand why so many of these folks are going out their way to show that this is the case. Is it a power play. Like laughing at everyone else? Hahaha. I’m a bigger idiot than you but still I’m richer. Fuck you. Or are they just that clueless? Both of which only serve to show that our rich overlords are not deserving of their wealth for the most part (and the ones that are, are unfortunately the exception).
- NoLinkToMe 5y agoThis really is just arguing semantics on the internet, one of the least interesting activities, usually. I can almost guarantee that Paul Graham has read material produced by companies, which contain information on a business' plans and current status, including financial. If you don't want to call that reading a business plan, that's fine. But it's really besides the point. Further, he's denied that other people have read business plans or balance sheets for him. That's also very likely false. Reviewing a balance sheet is an elementary part of due diligence, I'm sure that many startups have been funded based on a conversation over coffee, but at the scale of PG's investments I don't believe he's never been involved in a transaction where his side has had someone due the most elementary due diligence to confirm founders' statements, e.g. by reviewing a balance sheet / income statement, which he has denied. I mean hell, he's been director of various companies, typically you're required to co-sign at least annual financial statements as a regulatory obligation, sometimes audited, which always include balance sheets. Come on. Just restate your point: I don't focus investment decisions on traditional balance sheets at all, but rather on conversations with founders.
- todorus 5y ago"This really is just arguing semantics on the internet, one of the least interesting activities, usually." "Come on. Just restate your point: I don't focus investment decisions on traditional balance sheets at all, but rather on conversations with founders." It's pretty interesting once you get into it, isn't it? Welcome to the club!
- NoLinkToMe 5y agoUnfortunately I've been a member of this club for 20 years :(
- hgomersall 5y agoIf startup business plans were accurate, 90% of them would end with "go bust".
- dimitar 5y agoIt's like exams and Europass CVs. At some point taking exams can be a separate skill from learning the material. CVs in Europass format, force all candidates at filling a form and the CV fails at it's purpose of differentiating candidates. I imagine if business plans, balance sheets and pitch decks become established formats, the risk of people focusing too much on them.
- everyone 5y agoHow are business plans not just guesswork? In practice how often does what actually happens to the business irl conform to the plan? And how closely? Like if you make 25% more profit in one year than planned than that's clearly way off and counts as not conforming.
- greatgib 5y agoLet's translate him: "I have subordinates to do the annoying job of doing that for me"
- thenerdhead 5y agoIt's not really uncommon. Some very successful investors & businesses can focus purely on the value exchange. At the end of the day, KPIs, OKRs, MAUs, etc are all just numbers. What really matters is whether the value being exchanged is business worthy. Like take an example about the Steam Deck recently by Valve. Gaben doesn't really care about these metrics right now because he's trying to validate a hypothesis that PC gaming can work as a handheld device (which has been tried for many years). Can it fail miserably? Maybe. Or look at Mark Cuban's recent online affordable pharmacy. Mark obviously is showing he doesn't care about draining individual's bank accounts for life saving generic drugs, but validating if the big pharma industry is a bit corrupt and wants to slash the prices down. Can it fail miserably? Maybe. Do you need business plans, balance sheets, or pitch decks to do this? Arguably not. You just need to know how driven the individuals/team is and whether there's a sense of product-market fit.
- projektfu 5y agoSomeone must be making sure there’s not a few million in debt casually tossed in, making a $250,000 or whatever investment into a $3,250,000 investment. Beyond that, balance sheets are really just part of the process of making sure the company’s not fragile. Startups are always fragile.
- prea 5y agoAm I missing something? What's the point of the tweet other than to elicit a reaction? And then in the replies: 'I CAN'T BELIEVE I ELICITED A REACTION!.
- jordanpg 5y agoBecause it's Paul Graham, who's a very rich and wise venture capitalist, over whose musings people who also want to be very rich and wise venture capitalists someday, must fawn and nod their heads and agree with, as if he has said something very profound. Is this tweet wise and profound? Obviously not. Is there a kernel of useful information buried in there? Barely. As you said, is the purpose really just to elicit a reaction? Obviously, yes. These kinds of remarks remind me of people who used to brag about getting good grades despite not doing the reading or homework, as if that's a virtue. They're not harmless, because plenty of people will take away from this the idea that you don't need to do research on things, in general. Because Paul Graham is very rich and wise and he said so. It's dumb fortune cookie wisdom, like so many of his wise and profound edgy, contrarian viewpoints.
- randomsearch 5y agoTo inform potential applicants to YC or other founders that business plans are not essential/important to raise investment?
- blablabla123 5y agoActually small business advisors insist that founders do need a detailed business plan. But it's both necessary for founders, people giving advise and everyone involved that it depends on the kind of business. I used to think business plans are old school and overly formal. But it's good to know the correct reason.
- asperous 5y agoI have mentored for SCORE which is small business advising and is pretty old school, but they no longer push for business plans unless the client is looking for a bank loan. Instead, the choice of a lean business plan (business model canvas) is also offered or at least talked through. Someone has an idea but isn't sure what to do next. Well a business plan can just be the very essentials (who do you plan to serve and how... what are you planning on actually doing and can you afford to do that)
- whack 5y ago> The reason I don't care about business plans is that I can learn more from 5 minutes of interrogating the founders than from 10 pages of fluff they've written. Presumably Paul isn't meeting with every single founder who is applying to YC. So he must be using a different filtering mechanism to winnow down the funnel. This is usually the role that business plans have often played. As someone who hates writing business plans as well, it would be wonderful if YC released a "here's why you should meet with me" doc template that people can use widely as a replacement for business plans.
- chucke 5y agoI don't read the script, script reads me.
- ComradePhil 5y agoI read through the thread and his tweets. He's saying that he doesn't read the business plan, balance sheet or the pitch deck. He just asks them questions, answering which would answer everything in those documents. So, basically, in addition to writing all these things, you have to read it out to him because Mr. rich guy investor doesn't want to read it himself.
- lumost 5y agoIt’s a time saver, if people don’t have a good answer to a question they are likely to write a lot of info which doesn’t answer the question. In conversation you can pick up the BS a bit more readily than in a document.
- oaiey 5y agoI would argue that this is far more complex than he being lazy. A slide deck or any document is well curated, optimized and spin'ed in a way that the creator wants it. Same reason why I actually prefer to write meeting minutes. He does what anyone sane would do: ask the question and get real reactions. Most people are much better in lying (aka optimizing) on documents than in real life.
- petenick 5y agoYC funds software companies disrupting large markets. Software has high margins. Large markets are easy to intuit. Therefore business plans aren’t as necessary as opposed to other types of investors eg private equity.
- kzzzznot 5y agoDid anyone else notice a response tweet from Simon Leviev (the Tinder Swindler which was on Netflix)? > have you read my business plan ? https://twitter.com/3rd_layer/status/1492682875208146947?s=20&t=r2ShCcVXcR6EukY8tioA3A https://twitter.com/3rd_layer/status/1492682875208146947?s=2...
- donohoe 5y agoTotal speculation here, but I would guess that others at YC do look at the balance sheets etc and could/would flag any issues to Paul.
- anonu 5y agoA business plan is important when things start to scale. When you have more investors or more management. It becomes a communication piece.
- fartcannon 5y agoSo, PG got lucky once, and now he has the luck to burn on numerous risky ventures until one pays off and he gets more luck. This is basically a humble brag.
- sidlls 5y agoWell, yes, that sums up technology VC in general. It is exceptionally rare for a person to truly have seen an opportunity with the clarity of vision to have any real confidence it will succeed. Almost of the successes in this world boil down to the luck of timing and, more importantly, social networking and connections.
- steelstraw 5y agoHis response to some of the reactions he's getting: Even after all these years, Twitter still surprises me. This is the tweet that makes people accuse me of lying and announce that they're unfollowing me? People are that attached to business plans and balance sheets? How completely mystifying. The reason I don't care about business plans is that I can learn more from 5 minutes of interrogating the founders than from 10 pages of fluff they've written. The reason I don't care about balance sheets is the same reason I don't care who's leading 100 yards into a marathon. https://twitter.com/paulg/status/1492694430129672194 https://twitter.com/paulg/status/1492694430129672194
- jollybean 5y agoA 'balance sheet' is useless in determining the value of an early stage company. Let's be a bit cynical: the 'balance sheet' for a company at 0.2 on the scale of 0->1->N is basically the 'download and stickiness numbers'. YC strongly encourages users to 'share the numbers'. The problem with this, is basically it's not really super early stage investing. The implication is, you need to have a company showing material traction with a product, before taking on significant funds. Which is fine, but let's just be real about what that means. It's a myth that 'rounds have been getting bigger' in a way ... really we've just been renaming rounds. If you need to 'post good numbers' to get into a Seed, well, then it's not really 'Traditional Seed', it's something later.
- _xnmw 5y agoInteresting to contrast this with PG's most recent essay "Putting Ideas into Words" where he argues that people who don't write don't have fully formed ideas. What else is a business plan besides a thoughtful writeup? I think it would give me a good idea into how a person thinks. [1] http://paulgraham.com/words.html http://paulgraham.com/words.html
- allenleee 5y agoI wonder If PG wrote deck/business plan when he pitched LPs for money.
- solarmist 5y agohttps://twitter.com/paulg/status/1492684063097778182?s=21 https://twitter.com/paulg/status/1492684063097778182?s=21
- gkop 5y agoThe cognitive dissonance from pg and people in this thread bending over backwards to square his circle, is incredible.
- deltree7 5y agoIt's the opposite. Here's one of the tech influential thinkers literally opening his mind. But, no, we have to hate him and cancel him and pitchfork him.
- CoffeeOnWrite 5y agoWhat I mean by cognitive dissonance is “I have never read a business plan”, followed by “I wrote something I called a business plan, but is it really a business plan? I don’t know what a business plan is”, to “what I meant by business plan is 20 pages of fluff”. The rhetoric is so incohesive that one could not possibly engage in constructive dialogue. We’re wasting our brain cells here. Words have meaning, and pg has done a poor job articulating himself in this instance, if his goal is to be understood. Since pg is a social media personality and his business ventures stand to benefit from his social media audience, reasonable people may speculate that his goal is NOT to be understood, but rather to drive engagement, and to that end he has been successful here. But it’s not actual thought leadership, it’s purely marketing. The hate/cancel/pitchfork sentiment expressed by some replies, could be seen then as an intended consequence of pg’s remarks - the outrage-driven engagement cycle is a well known dynamic in social media. And the defenders like you are the other side of the same coin. It’s amazing and somewhat sad, but not surprising, seeing smart people get worked up over this.
- lpolovets 5y agoI'm a seed stage VC. Reposting my thoughts on this from twitter: YC invests at $2m valuations, so Paul's take is very logical. This won't apply to startups raising seed rounds at 10x higher valuations. At a 10x valuation, you (literally) need to show your startup is 10x more likely to win. Progress and pitching are part of that, but so are financial plans. Some examples of what financial plans reveal: - are the business model assumptions thoughtful or simplistic (e.g. ramp up team over time vs hire all on day one)? What ARE the key assumptions and levers? - do you have buffer time set aside for a future fundraise? - are you realistic about costs/salaries? Addendum: basically if you're raising a seed round, you should expect that many investors will ask about financial models and projections. This is less about your predicted revenue in month 36, or whatever, and more about understanding how you think about the business for the next year or two.
- Scea91 5y ago> At a 10x valuation, you (literally) need to show your startup is 10x more likely to win. Progress and pitching are part of that, but so are financial plans. Nitpick but this is (literally) not true. Expected value is a function of FUTURE VALUE and PROBABILITY. Unless all the wins are the same future value you can't reduce the reasoning just to probability as you suggest. Practically the valuation is also determined (maybe dominantly) by supply and demand as you are not the only investor in the market.
- lpolovets 5y agoYou're right, I should've said EV has to be 10x higher, not probability of success. That said, in my experience it's much more common to de-risk a business by an order of magnitude than to 10x the market size.
- toss1 5y agoCool. Counterpoint from the opposite side of the table. I agree that modeling these factors, checking your assumptions, finding what factors your plan is most sensitive/responsive to, estimating realistic buffers, etc. is extremely useful, and even essential. And doing so at an early stage is very good. However, as Eisenhower said: “In preparing for battle I have always found that plans are useless, but planning is indispensable.” Having been expected to write and present such plans /pitch decks as a key element of, or prerequisite to, the first fundraising meeting, I found it absurd. It was obvious to me as I built the models and wrote the deck that it was pure fiction. It was merely a projection of the intersection of our vision, plan, and execution, and the economy, in the next X years. We were basically being asked to produce a linear projection when the entire point is to generate non-linear results and returns. And whatever we produce is hugely sensitive to assumptions in the models. How can selecting a single point out of that fiction even begin to be actually useful as a predictor, at least for anything but linear growth businesses? PaulG highlighted this in his post just a few comments down [0]. So, I'd think it would instead be a great exercise to do with a candidate after the first few meetings, have them generate best-medium-worst case scenarios, and highlight the most sensitive factors - then discuss that, but not as an initial selection criteria. What am I missing here? [0] http://paulgraham.com/ace.html http://paulgraham.com/ace.html
- alasr 5y agoThis tweet kind of invoke the eternal(?) form vs. substance debate. Regarding the business plan part, it seems PG does indeed read[1] "business plans": not from some written document which has static form but from a source having a more dynamic form i.e. people who are primarily responsible for writing of those static documents if/when needed. And, about the balance sheet part, I don't really know how useful it is for the kind of businesses (early stage startup) in which PG and YC are interested and primarily invests in. --- [1] - https://twitter.com/paulg/status/1492695627888672771 https://twitter.com/paulg/status/1492695627888672771
- alasr 5y agoNote: since I can't edit my earlier post, writing a new one (for future reference) which better reflects my earlier thinking. 1. s/eternal/age-old/ # replace "eternal" with "age-old" 2. s/form vs. substance/signified vs. signifier/ # I think signified-signifier[1] distinction is more specific and apt compared to form-substance distinction when it comes communication. Additionally if you're interested and want to "read" more on "business plans", I would recommend checking MIT's "Nuts and Bolts of Business Plans" course[2], at least the first lecture[3, 4] if you aren't motivated enough to go through the whole course. --- [1] - Signified and Signifier: https://en.wikipedia.org/wiki/Signified_and_signifier https://en.wikipedia.org/wiki/Signified_and_signifier [2] - MIT OCW - Nuts and Bolts of Business Plans: https://ocw.mit.edu/courses/sloan-school-of-management/15-s21-nuts-and-bolts-of-business-plans-january-iap-2014/index.htm https://ocw.mit.edu/courses/sloan-school-of-management/15-s2... [3] - Business Plan Basics - Lecture Video: https://ocw.mit.edu/courses/sloan-school-of-management/15-s21-nuts-and-bolts-of-business-plans-january-iap-2014/lecture-videos/part-1-introduction-and-overview-of-business-plans/ https://ocw.mit.edu/courses/sloan-school-of-management/15-s2... [4] - Business Plan Basics - Slide: https://ocw.mit.edu/courses/sloan-school-of-management/15-s21-nuts-and-bolts-of-business-plans-january-iap-2014/lecture-notes/MIT15_S21IAP14_Session1.1.pdf https://ocw.mit.edu/courses/sloan-school-of-management/15-s2...
- bagacrap 5y agoIf you've literally never read any business plan, how do you know one can't hold value?
- pl0x 5y ago