7 ms·

> 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 fu

> 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.
  - tomhoward 5y ago
    Sure, he makes some personal investments in later rounds of YC companies he particularly likes and believes in. I know that's the case with Rescale. But again, his investment in Rescale isn't because he read their balance sheet and business plan; it's because he's been following their progress closely since YC invested in them in 2012. So he has at least 9 years of progress he's been following, via regular email updates and conversations with the founders. (You mention the $55M round as if it's evidence of the scale of investments he makes, but his share of that round was likely quite small. He really doesn't have a team to do due diligence on his personal investments. He just invests in people he personally believes in.) As for being a director; he's explicitly avoided taking directorships in companies he's invested in, as he doesn't want to deal with the things that directors have to do, like read balance sheets. The only exception he made to that rule is Watsi, a non-profit - https://techcrunch.com/2013/04/19/paul-graham-watsi/ https://techcrunch.com/2013/04/19/paul-graham-watsi/ Please don't be patronising; I've been polite and respectful towards you and the others in this discussion, despite barbs being sent my way. I'm just trying to clarify misapprehensions as I have knowledge about the topic.

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.
- tomhoward 5y ago
  Sure, he makes some personal investments in later rounds of YC companies he particularly likes and believes in. I know that's the case with Rescale. But again, his investment in Rescale isn't because he read their balance sheet and business plan; it's because he's been following their progress closely since YC invested in them in 2012. So he has at least 9 years of progress he's been following, via regular email updates and conversations with the founders. (You mention the $55M round as if it's evidence of the scale of investments he makes, but his share of that round was likely quite small. He really doesn't have a team to do due diligence on his personal investments. He just invests in people he personally believes in.) As for being a director; he's explicitly avoided taking directorships in companies he's invested in, as he doesn't want to deal with the things that directors have to do, like read balance sheets. The only exception he made to that rule is Watsi, a non-profit - https://techcrunch.com/2013/04/19/paul-graham-watsi/ https://techcrunch.com/2013/04/19/paul-graham-watsi/ Please don't be patronising; I've been polite and respectful towards you and the others in this discussion, despite barbs being sent my way. I'm just trying to clarify misapprehensions as I have knowledge about the topic.