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It's a gem. What I'm curious about is how these two ended up at YC as partners and not founding another company. I think I know the answer but always interested

by asim 3y ago

It's a gem. What I'm curious about is how these two ended up at YC as partners and not founding another company. I think I know the answer but always interested to know other people's journeys.

romeros 3y ago
I think pg said it best in one of his tweets/essays ?? not sure. Essentially starting a startup is super hard. You can't just chill/half ass and still do well even if you had already succeeded before.
- simonswords82 3y ago
  Correct, and to add - It is infinitely harder to force yourself through the start-up meat grinder if you know that if that start-up fails it does not materially impact you financially.
light_triad 3y ago
As Michael has said in one of the shows getting to PMF is a miracle. If you’re already set for life it’s less risky to play the odds by investing in hundreds of startups rather than starting one. Also there’s altruistic motives in giving back to the community etc.
- jjtheblunt 3y ago
  What is PMF ?
  - phantompeace 3y ago
    Product Market Fit
  - deleted 3y ago
    [deleted]
  - prasoonds 3y ago
    Product Market Fit. Basically, can you find through iteration something that people really want and are willing to pay for
  - fuzzy_biscuit 3y ago
    Product Market Fit
- arbuge 3y ago
  > If you’re already set for life it’s less risky to play the odds by investing in hundreds of startups rather than starting one. Risky is not the word I would use to phrase that, at least not in the financial sense. There's little such risk there, "if you're already set for life" as you said. More comfortable, for sure. Easier. PG has said as much himself on X several times when asked whether starting a company or investing was harder.
  - light_triad 3y ago
    I agree with you I meant reputational risk and the amount of output per level of input. It's hard to be as hungry once you've 'made it' or at least, your drive changes. Arguably at that level you can have more impact as a mentor of a large number of domain experts doing great work rather than trying to becoming one yourself.
7e 3y ago
Everyone at YC knows exploiting naive founders is more profitable and less risky than doing a startup. The chumps are the founders, not the investors.
- echelon 3y ago
  Almost every major tech company took capital. Almost every major company period took capital. Money is energy and time. You can do it without these, but the gradient is steeper.
  - robocat 3y ago
    > major Selection bias. The median return for a founder is about $0. If you want to be a billion+ market cap company, sure, use capital to get there. But chances are that the startup will fail. VC investing is diversified - a founder is not.
    - aleph_minus_one 3y ago
      > VC investing is diversified - a founder is not. Founders are free to make agreements to swap equities of their companies with each other. For simplicity assume that there exist three startups with a similar estimated company value. Each founders gives two 10 % equities (and keeps 80 %) of his startup to each of the two founders of the other two startups. This way, the risk of founding a startup becomes a little more diversified.
      - robocat 3y ago
        > Founders are free to make agreements to swap equities of their companies with each other. Only in theory. Firstly it depends on the shareholders agreement, and other contracts with the VC. Co-Sale rights, First Refusal rights, drag-along etcetera etcetera can easily effectively prevent selling common shares. Or clauses just put the idea into the too hard basket. Secondly: nobody wants to give away voting rights. Small investors don't care about voting rights in public companies so they forget just how important voting is in private companies Thirdly: the necessary diversification would need to swap more than 50% of shares to get effective diversification. Good luck with that!! Forthly: the dynamic would be that everyone would want to swap their shares with the perceived best startup in the cohort. It just wouldn't work. The only way it could work would be if founders got some ownership of a VC fund. > little more diversified. Exactly: not diversified enough. VCs often own significant percentages of the companies they invest in. And they own preferential shares. Common shares have a completely different risk profile than preferential shares.
7e 3y ago
Everyone at YC knows exploiting naive founders is more profitable and less risky than doing a startup. The key is to perpetuate a mythical cult around the startup and convince huge swaths of kids to give you equity for almost nothing. The chumps are the founders, not the investors.
- idiotsecant 3y ago
  Effort and result are not synonyms. YC investors take a big risk - a lot of these startups will have well intentioned and hard working founders and they will fail anyway. VCs provide a valid service. They make money (if they are good guessers and are also lucky) and founders make money (if they work hard and smart and are also lucky). Everyone wins.
- simonw 3y ago
  "The key is to perpetuate a mythical cult around the startup and convince huge swaths of kids to give you equity for almost nothing" I found that amusing seeing as the second most recent video in their series, "Should Your Startup Bootstrap or Raise Venture Capital?", spends most of its time making a strong case for why VC isn't right for the vast majority of founders: https://www.youtube.com/watch?v=D81y-kh11oI https://www.youtube.com/watch?v=D81y-kh11oI
  - fakedang 3y ago
    Tbf that video came pretty late (post the ZIRP era). Before that, YC was one of the strongest proponents for raising VC because that's ingrained in their business model. I've heard that YC before would be quite disappointed at founders choosing not to raise money, because that meant a lower upside for them via the SAFE model. Not to mention, most YC exits are usually via acquisitions, and often between YC companies.
    - simonw 3y ago
      Right, YC are a VC firm themselves - so if you don't want to do the VC rocketship thing they're probably not the right match for you.

by asim 3y ago

It's a gem. What I'm curious about is how these two ended up at YC as partners and not founding another company. I think I know the answer but always interested to know other people's journeys.

romeros 3y ago

I think pg said it best in one of his tweets/essays ?? not sure. Essentially starting a startup is super hard. You can't just chill/half ass and still do well even if you had already succeeded before.

simonswords82 3y ago
Correct, and to add - It is infinitely harder to force yourself through the start-up meat grinder if you know that if that start-up fails it does not materially impact you financially.

light_triad 3y ago

As Michael has said in one of the shows getting to PMF is a miracle. If you’re already set for life it’s less risky to play the odds by investing in hundreds of startups rather than starting one. Also there’s altruistic motives in giving back to the community etc.

jjtheblunt 3y ago
What is PMF ?
- phantompeace 3y ago
  Product Market Fit
- deleted 3y ago
  [deleted]
- prasoonds 3y ago
  Product Market Fit. Basically, can you find through iteration something that people really want and are willing to pay for
- fuzzy_biscuit 3y ago
  Product Market Fit
arbuge 3y ago
> If you’re already set for life it’s less risky to play the odds by investing in hundreds of startups rather than starting one. Risky is not the word I would use to phrase that, at least not in the financial sense. There's little such risk there, "if you're already set for life" as you said. More comfortable, for sure. Easier. PG has said as much himself on X several times when asked whether starting a company or investing was harder.
- light_triad 3y ago
  I agree with you I meant reputational risk and the amount of output per level of input. It's hard to be as hungry once you've 'made it' or at least, your drive changes. Arguably at that level you can have more impact as a mentor of a large number of domain experts doing great work rather than trying to becoming one yourself.

7e 3y ago

Everyone at YC knows exploiting naive founders is more profitable and less risky than doing a startup. The chumps are the founders, not the investors.

echelon 3y ago
Almost every major tech company took capital. Almost every major company period took capital. Money is energy and time. You can do it without these, but the gradient is steeper.
- robocat 3y ago
  > major Selection bias. The median return for a founder is about $0. If you want to be a billion+ market cap company, sure, use capital to get there. But chances are that the startup will fail. VC investing is diversified - a founder is not.
  - aleph_minus_one 3y ago
    > VC investing is diversified - a founder is not. Founders are free to make agreements to swap equities of their companies with each other. For simplicity assume that there exist three startups with a similar estimated company value. Each founders gives two 10 % equities (and keeps 80 %) of his startup to each of the two founders of the other two startups. This way, the risk of founding a startup becomes a little more diversified.
    - robocat 3y ago
      > Founders are free to make agreements to swap equities of their companies with each other. Only in theory. Firstly it depends on the shareholders agreement, and other contracts with the VC. Co-Sale rights, First Refusal rights, drag-along etcetera etcetera can easily effectively prevent selling common shares. Or clauses just put the idea into the too hard basket. Secondly: nobody wants to give away voting rights. Small investors don't care about voting rights in public companies so they forget just how important voting is in private companies Thirdly: the necessary diversification would need to swap more than 50% of shares to get effective diversification. Good luck with that!! Forthly: the dynamic would be that everyone would want to swap their shares with the perceived best startup in the cohort. It just wouldn't work. The only way it could work would be if founders got some ownership of a VC fund. > little more diversified. Exactly: not diversified enough. VCs often own significant percentages of the companies they invest in. And they own preferential shares. Common shares have a completely different risk profile than preferential shares.

7e 3y ago

Everyone at YC knows exploiting naive founders is more profitable and less risky than doing a startup. The key is to perpetuate a mythical cult around the startup and convince huge swaths of kids to give you equity for almost nothing. The chumps are the founders, not the investors.

idiotsecant 3y ago
Effort and result are not synonyms. YC investors take a big risk - a lot of these startups will have well intentioned and hard working founders and they will fail anyway. VCs provide a valid service. They make money (if they are good guessers and are also lucky) and founders make money (if they work hard and smart and are also lucky). Everyone wins.
simonw 3y ago
"The key is to perpetuate a mythical cult around the startup and convince huge swaths of kids to give you equity for almost nothing" I found that amusing seeing as the second most recent video in their series, "Should Your Startup Bootstrap or Raise Venture Capital?", spends most of its time making a strong case for why VC isn't right for the vast majority of founders: https://www.youtube.com/watch?v=D81y-kh11oI https://www.youtube.com/watch?v=D81y-kh11oI
- fakedang 3y ago
  Tbf that video came pretty late (post the ZIRP era). Before that, YC was one of the strongest proponents for raising VC because that's ingrained in their business model. I've heard that YC before would be quite disappointed at founders choosing not to raise money, because that meant a lower upside for them via the SAFE model. Not to mention, most YC exits are usually via acquisitions, and often between YC companies.
  - simonw 3y ago
    Right, YC are a VC firm themselves - so if you don't want to do the VC rocketship thing they're probably not the right match for you.