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If you’re wondering what to take away from this article: the simple take away is that YC has the power to get what it wants, for the companies it wants. If yo

by cj 2y ago

If you’re wondering what to take away from this article: the simple take away is that YC has the power to get what it wants, for the companies it wants. If you happen to be in YC’s good graces, they will reward you in ways described in the article. If you’re not, they won’t take the time. I was in YC in 2012 (2 yrs after the founder writing this article, and one of the last years PG was directly involved). By that time it was clear that YC had turned into a “spray and pray” accelerator, meaning they started favoring volume of investments over everything else. When they did that, it also required that they split their attention between more companies, which inevitably meant that the sort of anecdotes described in the article still happen, but only for companies YC likes and believes in post-accelerator. YC definitely discriminates from that perspective- they choose which startups they think have the most promise during any given batch, and they give those founders preferential treatment. Which is to be expected. How else can you scale an accelerator?

michaelt 2y ago
> How else can you scale an accelerator? I mean, you could delegate the scaling to the startups you're investing in. If I'm gambling at the horse races, should I bet $100 on every horse to make my gambling scalable and diversified, because I don't feel I can pick winners with any reliability?
- fragmede 2y ago
  That is the game though. If I bet $100k on each of 10 contestants. That’s $1m total. With odds of 1000:1, a single win pays $100m enough to cover all bets and leave a huge profit.
  - geysersam 2y ago
    If the horse race has 10 contestants why would the odds be 1000:1?
    - fragmede 2y ago
      Because it's an imperfect metaphor for how VC investing works to further enrich the wealthy.
    - naming_the_user 2y ago
      Not everyone is competing. In the economy as a whole how many people are even business owners? Most people go to work and price take at their job without negotiating, without even moving area, without even studying, etc. You also have multi-company-monopoly effects for lack of a better term, e.g. if there are 10 competitors that make semiconductors - _everyone_ needs semiconductors, then if you pick the appropriate balance and don't buy in at an overvalued time you can invest in all ten and still make money because there is a net flow of funds into the system from outside of it.
      - sebastiennight 2y ago
        Is "oligopoly" the word you were looking for?
- brudgers 2y ago
  Even on their best day a punter is still a punter. The money in horse racing is in breeding.
worksonmymach 2y ago
I'd love to know who "wins" in a scaled YC vs. the oceanic tide that is the SP500 and it's capital sucking and brain sucking ways. A Google can stop 10000 potential startups simply with RSUs and cap another 10000 by buying them out (which is kinda good for YC but not really... they'd rather own a chunk of a Google).
- thierrydamiba 2y ago
  I think you’re vastly underestimating how hard it is to pick winners and stifle competition. Using your logic, if it was so easy why didn’t Google stop OpenAI? Meta? Perplexity?
  - Gud 2y ago
    Maybe they killed a hundred similar companies and those three slipped through?
    - high_na_euv 2y ago
      Hundreds of Facebooks? Very unlikely
    - williamstein 2y ago
      https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Alphabet https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio...
  - deleted 2y ago
    [deleted]
  - miltava 2y ago
    I think that maybe we underestimate how hard it is to choose the right companies to “kill” when you’re a competitor. The default mode is to say that they won’t go anywhere because of many factors (they don’t have the resources, the access, the capability, etc). But sometimes they do. And in restrospect it’s obvious, but it’s not by the time you had the chance to stop it. And I think it’s probably good.
deleted 2y ago
[deleted]
brudgers 2y ago
for companies YC likes and believes in post-accelerator. YC definitely discriminates from that perspective- they choose which startups they think have the most promise during any given batch, and they give those founders preferential treatment. Based on what I’ve read, this seems backwards, I think YC chooses founders with the most promise and gives their companies preferential treatment because promise is only the ability to do things. But I could be wrong and probably am.
- djbusby 2y ago
  IME the earlier a company is in their lifecycle the more the team matters than the idea. So, choosing founders seems The Right Way
nsedlet 2y ago
I do agree. But the thing I would add though is that at least when I was there (W2012 - we were in the same batch!) YC and PG in particular were vocal about principles they believed in, especially the idea that naive young founders get kicked around in Silicon Valley and ought to be treated fairly. PG talked about this constantly and of course it’s a big theme of his essays. I remember one particular instance where a potential investor was behaving questionably and PG offered to step in and talk to them if they crossed a certain line (which they did not in the end). He was clear about what he concerned acceptable and unacceptable and why. And we were nowhere near the cool end of the batch. Yes YC acts in its interests but in my experience they live by good principles and that makes all the difference. The Chaos Monkeys anecdote is an example of that. So I don’t agree with the article’s framing that they throw their weight around to simply exercise whatever power they have over others for financial gain.
danaris 2y ago
Scaling is not a right, nor a duty, nor an inevitability.
rqtwteye 2y ago
Why does everything need to scale? Why couldn't they stick to taking a few high quality companies every year? There was enough money to be made that way. Seems the belief is that everything needs to scale until it doesn't work anymore.
- uoaei 2y ago
  So you're saying the "Peter principle" extends beyond tech employee performance and to tech company funding.
  - zeroonetwothree 2y ago
    If the Peter principle is just “you succeed until you don’t” then it’s tautological and applies in all contexts.
  - fsckboy 2y ago
    no, it's not the Peter Principle. The Peter Principle is pointing out that if you keep getting promoted by doing an exceptional job, and you stop getting promoted when you stop, that you have ended up leaving a job you were exceptional at, and landing in a job you are not good at. In a certain sense it's saying "you should be demoted back to your last job that you were exceptional at"; it's not suggesting that, it's suggesting a sort of snarky "this whole system is set up to fail" because it's from a "isn't capitalism grubby" perspective. None of this flavor is in the general YC scaling case, though you may be able to find it in various places within that.
    - uoaei 2y ago
      I think you'd be hard-pressed to make a case that VC-motivated business scaling does not consistently overinflate the businesses which are artificially propped up by investor cash. There are a bunch of companies, existing and dead, that show the folly of growth-at-high-cost.
      - fsckboy 2y ago
conductr 2y ago
I think they do this for any portfolio company and nothing is special about AdGrok here, if that’s what you imply with “good graces”. It’s a total power flex move that keeps the valley in check. If they allow this to take place they will have all their portfolio companies consumed in legal disputes in no time. They went after both the company and the VCs to send a message that this behavior won’t be tolerated. Word like this spreads.
shombaboor 2y ago
I always wonder how it feels to be in one of the companies who compete against each other in the same domain. I think they funded 3 AI code editors as once, how do you know the others aren't getting preferential help
OceanBreeze77 2y ago
agreed, this is not too controversial; it is the only way to scale. Time is a big investment for such accelerators and as such, diligently choosing which companies to invest time into is their most valuable decision.
glaugh 2y ago
I was in the S12 batch. A couple years later we were demonstrably failing. I emailed the general YC advice line or something similar with a question, and pg responded with a thoughtful comment that was genuinely useful I don’t think there’s any chance he saw any economic value in us, he took that time because he cared about startups and well-meaning failures like us It’s a small thing, yes, but I’ve always thought it said a lot about him
- cj 2y ago
  Agreed. In a similar vein, when our YC company was failing I had a great call with Jessica Livingston, and looking back it was purely moral support and not anything economically motivated.

by cj 2y ago

michaelt 2y ago

> How else can you scale an accelerator? I mean, you could delegate the scaling to the startups you're investing in. If I'm gambling at the horse races, should I bet $100 on every horse to make my gambling scalable and diversified, because I don't feel I can pick winners with any reliability?

fragmede 2y ago
That is the game though. If I bet $100k on each of 10 contestants. That’s $1m total. With odds of 1000:1, a single win pays $100m enough to cover all bets and leave a huge profit.
- geysersam 2y ago
  If the horse race has 10 contestants why would the odds be 1000:1?
  - fragmede 2y ago
    Because it's an imperfect metaphor for how VC investing works to further enrich the wealthy.
  - naming_the_user 2y ago
    Not everyone is competing. In the economy as a whole how many people are even business owners? Most people go to work and price take at their job without negotiating, without even moving area, without even studying, etc. You also have multi-company-monopoly effects for lack of a better term, e.g. if there are 10 competitors that make semiconductors - _everyone_ needs semiconductors, then if you pick the appropriate balance and don't buy in at an overvalued time you can invest in all ten and still make money because there is a net flow of funds into the system from outside of it.
    - sebastiennight 2y ago
      Is "oligopoly" the word you were looking for?
brudgers 2y ago
Even on their best day a punter is still a punter. The money in horse racing is in breeding.

worksonmymach 2y ago

I'd love to know who "wins" in a scaled YC vs. the oceanic tide that is the SP500 and it's capital sucking and brain sucking ways. A Google can stop 10000 potential startups simply with RSUs and cap another 10000 by buying them out (which is kinda good for YC but not really... they'd rather own a chunk of a Google).

thierrydamiba 2y ago
I think you’re vastly underestimating how hard it is to pick winners and stifle competition. Using your logic, if it was so easy why didn’t Google stop OpenAI? Meta? Perplexity?
- Gud 2y ago
  Maybe they killed a hundred similar companies and those three slipped through?
  - high_na_euv 2y ago
    Hundreds of Facebooks? Very unlikely
  - williamstein 2y ago
    https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Alphabet https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio...
- deleted 2y ago
  [deleted]
- miltava 2y ago
  I think that maybe we underestimate how hard it is to choose the right companies to “kill” when you’re a competitor. The default mode is to say that they won’t go anywhere because of many factors (they don’t have the resources, the access, the capability, etc). But sometimes they do. And in restrospect it’s obvious, but it’s not by the time you had the chance to stop it. And I think it’s probably good.

deleted 2y ago

[deleted]

brudgers 2y ago

for companies YC likes and believes in post-accelerator. YC definitely discriminates from that perspective- they choose which startups they think have the most promise during any given batch, and they give those founders preferential treatment. Based on what I’ve read, this seems backwards, I think YC chooses founders with the most promise and gives their companies preferential treatment because promise is only the ability to do things. But I could be wrong and probably am.

djbusby 2y ago
IME the earlier a company is in their lifecycle the more the team matters than the idea. So, choosing founders seems The Right Way

nsedlet 2y ago

I do agree. But the thing I would add though is that at least when I was there (W2012 - we were in the same batch!) YC and PG in particular were vocal about principles they believed in, especially the idea that naive young founders get kicked around in Silicon Valley and ought to be treated fairly. PG talked about this constantly and of course it’s a big theme of his essays. I remember one particular instance where a potential investor was behaving questionably and PG offered to step in and talk to them if they crossed a certain line (which they did not in the end). He was clear about what he concerned acceptable and unacceptable and why. And we were nowhere near the cool end of the batch. Yes YC acts in its interests but in my experience they live by good principles and that makes all the difference. The Chaos Monkeys anecdote is an example of that. So I don’t agree with the article’s framing that they throw their weight around to simply exercise whatever power they have over others for financial gain.

danaris 2y ago

Scaling is not a right, nor a duty, nor an inevitability.

rqtwteye 2y ago

Why does everything need to scale? Why couldn't they stick to taking a few high quality companies every year? There was enough money to be made that way. Seems the belief is that everything needs to scale until it doesn't work anymore.

uoaei 2y ago
So you're saying the "Peter principle" extends beyond tech employee performance and to tech company funding.
- zeroonetwothree 2y ago
  If the Peter principle is just “you succeed until you don’t” then it’s tautological and applies in all contexts.
- fsckboy 2y ago
  no, it's not the Peter Principle. The Peter Principle is pointing out that if you keep getting promoted by doing an exceptional job, and you stop getting promoted when you stop, that you have ended up leaving a job you were exceptional at, and landing in a job you are not good at. In a certain sense it's saying "you should be demoted back to your last job that you were exceptional at"; it's not suggesting that, it's suggesting a sort of snarky "this whole system is set up to fail" because it's from a "isn't capitalism grubby" perspective. None of this flavor is in the general YC scaling case, though you may be able to find it in various places within that.
  - uoaei 2y ago
    I think you'd be hard-pressed to make a case that VC-motivated business scaling does not consistently overinflate the businesses which are artificially propped up by investor cash. There are a bunch of companies, existing and dead, that show the folly of growth-at-high-cost.
    - fsckboy 2y ago

conductr 2y ago

I think they do this for any portfolio company and nothing is special about AdGrok here, if that’s what you imply with “good graces”. It’s a total power flex move that keeps the valley in check. If they allow this to take place they will have all their portfolio companies consumed in legal disputes in no time. They went after both the company and the VCs to send a message that this behavior won’t be tolerated. Word like this spreads.

shombaboor 2y ago

I always wonder how it feels to be in one of the companies who compete against each other in the same domain. I think they funded 3 AI code editors as once, how do you know the others aren't getting preferential help

OceanBreeze77 2y ago

agreed, this is not too controversial; it is the only way to scale. Time is a big investment for such accelerators and as such, diligently choosing which companies to invest time into is their most valuable decision.

glaugh 2y ago

I was in the S12 batch. A couple years later we were demonstrably failing. I emailed the general YC advice line or something similar with a question, and pg responded with a thoughtful comment that was genuinely useful I don’t think there’s any chance he saw any economic value in us, he took that time because he cared about startups and well-meaning failures like us It’s a small thing, yes, but I’ve always thought it said a lot about him

cj 2y ago
Agreed. In a similar vein, when our YC company was failing I had a great call with Jessica Livingston, and looking back it was purely moral support and not anything economically motivated.