4 ms·
Seems 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 d
by austenallred 5y ago
Seems 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.
- austenallred 5y agoOf course. That’s just not PG and isn’t a Business PlanTM.
- ptero 5y agoOne of the things PG reiterates is that at the early stage what the startup is doing changes rapidly. Many companies that end up being very successful have a product that looks quite different from what they set out to achieve. In such a setup, half-life of a business plan may be measured in weeks and its rigorous analysis may be a wasted time. Instead, I believe YC is trying to focus on finding good teams under the assumption that a strong team that can execute well has a higher chance of success than a worse team with a better starting plan. If anything, the business plan's value is to indicate that the founding team can think logically and realistically map products to market. Once the investment reaches 100M (YC Continuity's stated higher end), they probably focus more on the marked and business plans. Just my 2c.
- mbesto 5y agoPG also said in his thread that he never reads pitch decks. YC Continuity and similar follow-on investors are 100% reading pitch decks which have projections, financials, etc.
- pfortuny 5y agoAs a teacher, I would rather examine my students orally. Shorter and to the point. Much fairer. In that sense, what he says is normal.
- austenallred 5y agoIt’s also a bit of an IQ test to see how you can hit balls back across the net with zero preparation.
- lupire 5y agoZero response time. Tons of preparation required. See both Roger Federer and college debate teams.
- pfortuny 5y agoI never said the answers should be instantaneous. Never thought so.
- KineticLensman 5y ago> with zero preparation Yes, but the students have had preparation time: the teaching and revision prior to the oral examination. They should be able to answer questions, even if the answers aren't as 'clean' as they might be if the questions had been shown to them beforehand.
- tener 5y agoFair? Some people do much better in writing due to anxiety etc.
- darksaints 5y ago> PG/YC invest at the earliest stages Except when they don't.
- rgrieselhuber 5y agoIf they invest at the later stages, then the above four questions are validated enough anyway.
- ksaj 5y agoExactly this. My understanding of Paul's philosophy is that sometimes a person or group has the right idea and all the gumption to do it, but might not be at that stage yet. I used to work with a guy who was so hung up on business plans he always wrote me off when I scoffed at his obviously made-up numbers. "Kevin, you're just not going to be making a million dollars by the end of your first fiscal year." and he would arrogantly reply "Of course not, but you need the goal!" This is when one needs to understand the difference between "goal" and "dream" because his so-called business plans didn't support those numbers. Paul has mentioned before that sometimes an idea is early and so there is no real competition to speak of, and very few metrics by which to measure the value. Just a hunch that this will take off to unknown lofty heights and therefore might be worth investing in.
- devmunchies 5y agoYes, but how would he know business plans and balance sheets aren’t useful unless he’s looked at one and decided to never look at one again?
- austenallred 5y agoBy looking at an outline of one and saying, “I don’t know any of that, why waste my time?” Then becoming a billionaire.
- pl0x 5y agoAusten go back to running your scam school.