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We used to send lengthy, wordy updates to our investors, including YC/PG. Then one time he replied, frustratedly, imploring us to just tell him how much money

We used to send lengthy, wordy updates to our investors, including YC/PG. Then one time he replied, frustratedly, imploring us to just tell him how much money we were making, how much money we were spending, and how much we had in the bank. He later put that concept into this essay http://www.paulgraham.com/aord.html http://www.paulgraham.com/aord.html

darksaints 5y ago
How much you were making: seen on income statements as revenues and on balance sheets as accounts receivable. How much you were spending: seen on income statements as expenses and on balance sheets in accounts payable. How much cash in the bank: seen on cash flow statements as starting/ending cash position and seen on balance sheets as cash assets. Paul graham didn't care about your poetry, he just wanted to see your income statement and balance sheet. He apparently just didn't want to call it that because then he couldn't get edgy contrarian soundbites in on Twitter.
- tomhoward 5y ago
  You keep throwing barbs around but missing the important point. He specifically didn’t want to see balance sheets or income statements as he knows they can be full of bullshit (FWIW my only university qualification is in accountancy, so I know what he means). All he cared about the bank balance and whether it was going up or down, because that’s what indicates whether the company would survive or not. He still cared most about users and how excited they were and how fast their number was growing.
  - davidivadavid 5y ago
    Dude, everyone knows that. Seriously. Nobody's missing the "important point" because everybody who's been on Hacker News for five minutes has heard Paul Graham make that point. Indeed, people have made jokes about startup business plans for decades. Literally everyone knows that those things don't matter for super early stage startups. The tweet, however, and very much like many of Paul Graham's latest essays and tweets, seems to purposely elude any context, make a very generic a debatable statement, and assert it with complete aplomb. For someone who just wrote an essay about putting ideas into words, if he can't see that this tweet will be interpreted as "balance sheets are useless", he needs to put in a bit more work. That's what people react to, because the only conclusion is that since he doesn't want to tweet bromides, he must be trying to say something "controversial." It's really bordering on trolling, which for a man with his age and reputation is kind of cringy, embarrassing, and frankly disappointing to people who enjoyed his past stuff.
    - tomhoward 5y ago
      "Literally everyone knows that those things don't matter for super early stage startups." If literally everyone knows that then I don't need to be commenting, as my replies in this subthread are to someone insisting that balance sheets matter even before a company has a working product. Clearly they don't. It seems the people "reacting" are imagining some deeper intention or elaborate plot or some complicated character weakness behind it all. I just see him repeating what he's said for years: for early stage companies, you should just focus on making something people want.
      - davidivadavid 5y ago
        Yes, the "character weakness" is a penchant for midwit /r/iamverysmart takes that are well below people's usual expectations. Surely we can agree the reaction is overblown, but as someone said, this is definitely eyeroll material.
        tomhoward 5y ago
        I think perhaps the thing with PG is that people think the advice/wisdom he shares should be far more profound and complicated than it is. As someone who has frequently made the mistake of overcomplicating things, I don't see anything wrong with repeatedly telling early stage founders, in all kinds of different ways, to just focus on building a product that people want.
  - darksaints 5y ago
    But you just said that he actually didn't care much about that stuff, that he just wanted to know 3 specific datapoints. Datapoints that traditional financiers have gotten from traditional financial statements for centuries. Sure, there's lots of bullshit in financial statements. But there's also lots of bullshit in emails and slack messages. If someone is pumping up a balance sheet with dead receivables and check kiting and other forms of bullshittery, what's stopping them from saying the same thing over an email? You're acting like PG is sitting on something profound here, but there's nothing profound in the slightest. Nobody has ever gotten rich writing financial statements, they get rich by creating value that didn't exist before. The financial statements don't get you customers, don't build revenues, don't develop products, don't manage your cash flows, and don't manage expenses. But they're still crucial because they communicate, in a fairly standardized way, all of the most important measurements of a businesses success...including the three things that you just said PG cared most about. Telling people that financial statements don't matter is like telling a PhD-candidate astrophysicist that it doesn't matter that they can only communicate in Azerbaijani as long as their physics research is rock solid. It's already completely brain-dead obvious that the physics research quality is the most important thing...but it's a breach of duty to tell them that they don't need to know how to communicate it to their peers.
    - tomhoward 5y ago
      "You're acting like PG is sitting on something profound here" I'm really not. You and others are acting is if he said something far more grandiose and potentially influential than he did. He's just saying he focuses on teams and products when investing in super early stage companies. Finances matter only to the extent that the company can survive long enough to become sustainable. It's only then that GAAP accounting matters. It's really not that big a deal. Seriously, which competent startup founder is going to make a decision to "never" take care of balance sheets for their entire company-operating career based solely on this tweet?
  - NoLinkToMe 5y ago
    > Balance sheets or income statements as he knows they can be full of bullshit Agreed. However, I do have a question for you: what do you think can be more full of bullshit, an oral financial statement by the founder during a conversation, or his audited financial statements? Yes, the notion that balance sheets and income statements don't tell the whole story and can be misleading is a fact. It's also a fact that they're useful tools, part of elementary due diligence, in combination with conversations with founders. He asked financial questions that are in audited financial statements. Asking a founder and assuming it's all true is fine, but when making the investment he's surely having someone do due diligence on the finances to confirm. Yet he's denied that anyone else reads these documents for him, too.
    - tomhoward 5y ago
      I'm not sure how much you know about YC's history or PG's approach to investing, but in this and your other comment in this thread, you seem to be under a misapprehension. The types of companies PG has normally invested in were barely even companies yet. They were small teams with an idea. Maybe a prototype. Maybe a few users. Often they were not incorporated as companies when he agreed to invest, or if they were, they weren't old enough to have audited financial statements. He didn't do "due diligence" as there was nothing to do diligence on; pretty much everything to know about the company was sitting in front of him. Did he have to have a good bullshit detector? Yes, absolutely. But that was a skill he and the YC partners learned from doing thousands of interviews over many years. But also, it didn't matter if a few dud companies slipped through; they were investing such small amounts it didn't matter. That's the whole point of YC. In another comment you wrote "at the scale of PG's investments...". That's what says to me you're misunderstanding things. PG's investments have always been very small. He just did many of them.
      - NoLinkToMe 5y ago
        Sure, if you want to ignore the fact he was part of a C series funding round of $55 million, say just two months ago as an example, and believe he's solely done seed funding, be my guest. If you want to ignore the fact he's been a director and has to sign off on balance sheets, also be my guest.

darksaints 5y ago

How much you were making: seen on income statements as revenues and on balance sheets as accounts receivable. How much you were spending: seen on income statements as expenses and on balance sheets in accounts payable. How much cash in the bank: seen on cash flow statements as starting/ending cash position and seen on balance sheets as cash assets. Paul graham didn't care about your poetry, he just wanted to see your income statement and balance sheet. He apparently just didn't want to call it that because then he couldn't get edgy contrarian soundbites in on Twitter.

tomhoward 5y ago
You keep throwing barbs around but missing the important point. He specifically didn’t want to see balance sheets or income statements as he knows they can be full of bullshit (FWIW my only university qualification is in accountancy, so I know what he means). All he cared about the bank balance and whether it was going up or down, because that’s what indicates whether the company would survive or not. He still cared most about users and how excited they were and how fast their number was growing.
- davidivadavid 5y ago
  Dude, everyone knows that. Seriously. Nobody's missing the "important point" because everybody who's been on Hacker News for five minutes has heard Paul Graham make that point. Indeed, people have made jokes about startup business plans for decades. Literally everyone knows that those things don't matter for super early stage startups. The tweet, however, and very much like many of Paul Graham's latest essays and tweets, seems to purposely elude any context, make a very generic a debatable statement, and assert it with complete aplomb. For someone who just wrote an essay about putting ideas into words, if he can't see that this tweet will be interpreted as "balance sheets are useless", he needs to put in a bit more work. That's what people react to, because the only conclusion is that since he doesn't want to tweet bromides, he must be trying to say something "controversial." It's really bordering on trolling, which for a man with his age and reputation is kind of cringy, embarrassing, and frankly disappointing to people who enjoyed his past stuff.
  - tomhoward 5y ago
    "Literally everyone knows that those things don't matter for super early stage startups." If literally everyone knows that then I don't need to be commenting, as my replies in this subthread are to someone insisting that balance sheets matter even before a company has a working product. Clearly they don't. It seems the people "reacting" are imagining some deeper intention or elaborate plot or some complicated character weakness behind it all. I just see him repeating what he's said for years: for early stage companies, you should just focus on making something people want.
    - davidivadavid 5y ago
      Yes, the "character weakness" is a penchant for midwit /r/iamverysmart takes that are well below people's usual expectations. Surely we can agree the reaction is overblown, but as someone said, this is definitely eyeroll material.
      - tomhoward 5y ago
        I think perhaps the thing with PG is that people think the advice/wisdom he shares should be far more profound and complicated than it is. As someone who has frequently made the mistake of overcomplicating things, I don't see anything wrong with repeatedly telling early stage founders, in all kinds of different ways, to just focus on building a product that people want.
- darksaints 5y ago
  But you just said that he actually didn't care much about that stuff, that he just wanted to know 3 specific datapoints. Datapoints that traditional financiers have gotten from traditional financial statements for centuries. Sure, there's lots of bullshit in financial statements. But there's also lots of bullshit in emails and slack messages. If someone is pumping up a balance sheet with dead receivables and check kiting and other forms of bullshittery, what's stopping them from saying the same thing over an email? You're acting like PG is sitting on something profound here, but there's nothing profound in the slightest. Nobody has ever gotten rich writing financial statements, they get rich by creating value that didn't exist before. The financial statements don't get you customers, don't build revenues, don't develop products, don't manage your cash flows, and don't manage expenses. But they're still crucial because they communicate, in a fairly standardized way, all of the most important measurements of a businesses success...including the three things that you just said PG cared most about. Telling people that financial statements don't matter is like telling a PhD-candidate astrophysicist that it doesn't matter that they can only communicate in Azerbaijani as long as their physics research is rock solid. It's already completely brain-dead obvious that the physics research quality is the most important thing...but it's a breach of duty to tell them that they don't need to know how to communicate it to their peers.
  - tomhoward 5y ago
    "You're acting like PG is sitting on something profound here" I'm really not. You and others are acting is if he said something far more grandiose and potentially influential than he did. He's just saying he focuses on teams and products when investing in super early stage companies. Finances matter only to the extent that the company can survive long enough to become sustainable. It's only then that GAAP accounting matters. It's really not that big a deal. Seriously, which competent startup founder is going to make a decision to "never" take care of balance sheets for their entire company-operating career based solely on this tweet?
- NoLinkToMe 5y ago
  > Balance sheets or income statements as he knows they can be full of bullshit Agreed. However, I do have a question for you: what do you think can be more full of bullshit, an oral financial statement by the founder during a conversation, or his audited financial statements? Yes, the notion that balance sheets and income statements don't tell the whole story and can be misleading is a fact. It's also a fact that they're useful tools, part of elementary due diligence, in combination with conversations with founders. He asked financial questions that are in audited financial statements. Asking a founder and assuming it's all true is fine, but when making the investment he's surely having someone do due diligence on the finances to confirm. Yet he's denied that anyone else reads these documents for him, too.
  - tomhoward 5y ago
    I'm not sure how much you know about YC's history or PG's approach to investing, but in this and your other comment in this thread, you seem to be under a misapprehension. The types of companies PG has normally invested in were barely even companies yet. They were small teams with an idea. Maybe a prototype. Maybe a few users. Often they were not incorporated as companies when he agreed to invest, or if they were, they weren't old enough to have audited financial statements. He didn't do "due diligence" as there was nothing to do diligence on; pretty much everything to know about the company was sitting in front of him. Did he have to have a good bullshit detector? Yes, absolutely. But that was a skill he and the YC partners learned from doing thousands of interviews over many years. But also, it didn't matter if a few dud companies slipped through; they were investing such small amounts it didn't matter. That's the whole point of YC. In another comment you wrote "at the scale of PG's investments...". That's what says to me you're misunderstanding things. PG's investments have always been very small. He just did many of them.
    - NoLinkToMe 5y ago
      Sure, if you want to ignore the fact he was part of a C series funding round of $55 million, say just two months ago as an example, and believe he's solely done seed funding, be my guest. If you want to ignore the fact he's been a director and has to sign off on balance sheets, also be my guest.