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How Y Combinator made it smart to trust founders
- spacemarine1 9mo agoY Combinator forged a long-term, high-trust ecosystem to the benefit of all tech founders. The video games industry needs to do the same.
- daedrdev 9mo agoI feel like this is impossible given how many games flop each year.
- psawaya 9mo agoAs a YC founder turned gamedev, I can tell you that failure is the norm in both pursuits. As with YC, the question is: can we create more outsized outcomes when we succeed?
- daedrdev 9mo agoGreat point, I think I'm just being overly pessimistic Related, I find it interesting is that gacha games seem to ahve the highest possible returns but almost none are made by western game companies.
- trueismywork 9mo agoYou're right though. Industrial software/hardware in general always has money in all times. But gaming is essentially entertainment and people only spend on entertainment last. So gaming industry has a lot of failure but even if you're successful in a huge way, you won't earn huge money. There's a big cap there.
- awkward 9mo agoGames are a zero marginal cost industry driven by hits. The cap is pretty high. The floor is what you should be worried about.
- dpoloncsak 9mo agoAren't games like CSGO, FIFA, and Overwatch almost exclusively run on gacha-profits?
- jsheard 9mo agoYes they are. The implementation tends to differ from how eastern-developed gacha games work, but they're making billions from virtual slot machines nonetheless.
- dpoloncsak 9mo agoYeah, I still indulge in video games, and understand that on the surface CSGO skins feel different than Genshin summons, but from 100 feet up it's all the same crap, imo I do kinda get what you mean, though. Gacha mechanics feel expected in anything western, while 'loot boxes' are still a 'feature' of some games in the east. Eastern studios have definitely noticed, though, and are running the same playbook.
- dpoloncsak 9mo ago...I think I mixed up East and West oops
- modwilliam 9mo agoOverwatch is not
- dpoloncsak 9mo agoDidn't they bring back loot boxes?
- deleted 9mo ago[deleted]
- modwilliam 9mo agoYes, but you basically can't pay for them. Revenue is basically all from direct cosmetic sales or the battle passes
- chrisweekly 9mo agoFTR, A "gacha" game is a video game that uses randomized rewards and in-game currency to encourage players to spend money or time. (Sharing to help others bc I had to look it up.)
- Analemma_ 9mo agoI don't think that's possible and frankly I'd much prefer capital not even try. To the best of my knowledge, the only games which generate the really outsized outcomes you'd need for a VC portfolio do really gross, anti-player shit (gacha, lootboxes, whale fishing, etc.) to get it. Or they become distribution monopolies like Valve, which is fine-ish when Valve is private but would be a ongoing catastrophe if it had been VC-funded. I'd rather not encourage that.
- mikepurvis 9mo agoI agree. I'm not the moral police, but video games ultimately have to walk a line where they serve up entertainment that is engaging/addictive without being all-consuming and abusive, and do so for an amount of money for which there is general consensus is "reasonable". Trying to ride that to the moon is a very different proposition from a B2B play where you sell some service that concretelt delivers $X/mo recurring value to each customer for a $Y/mo price tag, and X > Y, but Y - your costs still turns a healthy profit. If you do that right, everyone is winning and the economy as a whole grows, not at all the same as the zero-sum game that is soaking a few whales and ruining their lives.
- 7777777phil 9mo agoI appreciate this perspective.. but I think there might be a false dichotomy here. Some of the biggest gaming success stories didn't rely on exploitative mechanics - Minecraft, Among Us, even Fortnite's initial success was based on solid gameplay before the monetization kicked in. The question is whether you can build sustainable platforms that create genuine value rather than just extracting it. Steam takes 30% but provides real distribution value. Maybe the trick is focusing on companies that help other developers succeed rather than trying to create the next Genshin Impact
- jsheard 9mo ago> Fortnite's initial success was based on solid gameplay before the monetization kicked in. Fortnite is a bit of weird backwards example because the early PvE iteration had paid lootboxes, but they were scrapped in the Battle Royale spinoff which actually got popular, and eventually removed altogether. They still do things like engineering FOMO to drive sales but ironically the games monetization was the most exploitative when nobody was playing it. But now the siren song of lootboxes is calling to them once again... https://kotaku.com/fortnite-loot-boxes-gambling-roblox-2000642980 https://kotaku.com/fortnite-loot-boxes-gambling-roblox-20006...
- mikepurvis 9mo agoOn some level it's the role of the publisher to pick winners and guide them over the finish line. See for example the hit machine that is Devolver: https://www.devolverdigital.com/games https://www.devolverdigital.com/games I'm not an indie dev, but if I was I would happily give up a chunk of my potential profit to be listed on there, knowing the size of the market that says "oh yeah... a Devolver title, I would blind-buy this, it's probably pretty good."
- mrdataesq 9mo agoI suspect games are like movies: for every 100 movies, around 20 of them make enough money to cover the losses of the other 80. But predicting which movies those will be is extremely difficult (Goldman's Law: Nobody knows nothin'). Any studio / label / distributor which can do better than the average is probably headed for greatness.
- guywithahat 9mo agoMy thought too, the bar is higher and the rewards are so much smaller. People don't appreciate how incredibly difficult it is to make a mediocre game
- seizethecheese 9mo agoVC math follows a power law and expects almost all investments to flop, and the one winner to pay for it all. The question here is not about the flops it’s: are the winners big enough?
- conartist6 9mo agoAnd now that they're eliminating diversity in their investments are you still certain they will pick the next generation's winners? All they're investing in are AI companies... Once upon a time someone like me for whom engineering competence is a core aspect of my identity would have never considered turning my back on YC. But now I'm just embarrassed by them. The things they now think are the only things worth investing in mostly make me want to vomit, like the vibe coding casino-IDE startup. As someone who still espouses their old values rather than their new ones, I'd rather succeed on my own.
- csa 9mo ago> All they're investing in are AI companies... Genuine question… Do you not think that a large percentage of (random cut off) $1b companies over the next 10 years will be AI? And/or do you not think that the next $100b+ company will be AI-centered?
- conartist6 9mo agoOver the next 10 years, no, I think the market will course correct within that time frame. AI is the sauce that's being slathered on everything right now and demand for it is driving record valuations, particularly for AI startups and their founders. That demand is all investor-driven though: investors are falling over themselves to make AI investments, while consumers are not actually especially eager to have all human contact progressively stripped from their lives.
- csa 9mo ago> That demand is all investor-driven though: investors are falling over themselves to make AI investments Largely true. > while consumers are not actually especially eager to have all human contact progressively stripped from their lives Hmm… I agree with this sentiment, but I think it’s mostly a straw man. There are many things that AI can do well that people will end up embracing directly or indirectly. Medical scans is one big one, imho. Mundane but important legal services is another. Skillful mediation of scutwork is definitely embraced. Good and fast simple customer service via phone or text will end up being very welcome (at least in some contexts). I realize that most people will prefer superlative human customer service, but that’s currently not a widespread available reality, especially for simple tasks. All sorts of learning (great and essentially free tutors). All sorts of practice (e.g., language, speeches, debates, presentations, etc.). All of the above (and more) are things that people are using AI for right now, and they seem to be loving it. I realize that some folks use AI tools in regressive and sometimes dehumanizing ways, but that’s not the fault of the tool, imho.
- bob1029 9mo agoMaking a game that will sell well on Steam is typically much harder than finding a bunch of boring business leaders and pitching them a SaaS or consulting package. On the surface it might seem simpler to do a game, but once you get into the mechanics of building, testing and publishing something for the masses, the fear of cold calling or emailing total strangers begins to evaporate quickly. About 99% of the work you do on a game will wind up in the trashcan. Doesn't matter what kind of work it is. Code, audio, textures, models, map layouts, multiplayer balancing work, etc. are all susceptible in the same way. No one is safe from the chaos. It takes a lot of human energy and persistence to produce sufficient 1% content to fill up a player experience. I'd estimate for a B2B SaaS product, the ratio is approximately the same, however you don't need such a broad range of talent to proceed. One developer with a desire to do the hard things constantly can be all you need to make it to profitability. Going from one employee to N employees in a creative venture is where things go bananas. If you absolutely must do an indie game and you need it to succeed or your internet will get cut off, you will want to strongly consider doing it by yourself. Figuring out how to split revenue and IP with other humans when you can't get the customer on the phone is a nightmare.
- spacemarine1 9mo agoMany people agree that being a video game founder is harder than being a tech founder. Staying small and being as resourceful as you can is a good way to mitigate risk.
- kjkjadksj 9mo agoThe thing is when a game flops it can be popular in the future. It is still a game that does game things. When $dumbapp flops though, it is a stronger signal that whatever it is trying to do may have no market at all. Like giving a fish a skateboard.
- jacquesm 9mo agoNo fewer than the number of start-ups that flop each year, so that's not a hindrance as far as I'm concerned.
- deleted 9mo ago[deleted]
- WhereIsTheTruth 9mo agoYC works because B2B can survive early with a few paying customers Gaming is pure B2C: hit driven, capital intensive, and unforgiving
- spacemarine1 9mo agoFair point though Humble Bundle was B2C. There are clever gaming platforms out there and the best games seem to turn into platforms effectively.
- doctorpangloss 9mo agoIt’s a little more nuanced than that. B2B offerings cost money, video games cost time haha
- api 9mo agoB2B isn't as hit driven as gaming but it's still hit driven. Most startups fail.
- FloorEgg 9mo agoThat doesn't sound right to me. A lot of b2b comes with high barrier to entry. Also I know of many successful indie games, some of which were built by one person. I can think of so many exceptions to your point on both sides that I question your thesis as a rule.
- rapidfl 9mo agoThat's a good point. Some of the (many) B2B companies in YC also get a decent start by selling to the other YC companies.
- deadbabe 9mo agoThe game industry needs no such thing. You can make profitable games very cheaply, and business models are simple and well understood. It’s a matter of just making a good game and getting it good exposure to customers.
- throw-12-16 9mo agoYou should check out BigMode. Dunkey is building a game incubator of sorts and there are some interesting titles coming out of it.
- duped 9mo ago> The video games industry needs to do the same. Video games are a subset of entertainment which is capped in TAM by the population the game reaches, the amount of money they're willing to spend per hour on average, and average number of hours they can devote to entertainment. In other words, every dollar you make off a game is a dollar that wasn't spent on another game, or trip to the movies, or vacation. And every hour someone plays your game is an hour they didn't spend working, studying, sleeping, eating, or doing anything else in the attention economy. What makes this different from other markets is that there is no value creation or new market you can create from the aether to generate 10x/100x/1000x growth. And there's no rising tide to lift your boat and your competitors - if you fall behind, you sink. The only way to grow entertainment businesses by significant multiples is by increasing discretionary income, decreasing working hours, or growing population with discretionary time and money. But those are societal-level problems that take governments and policy, and certainly not venture capital.
- conartist6 9mo agoI wonder how long this can survive now that their priority is to fund AI users to use AI
- spacemarine1 9mo agoAI tech has the spotlight right now for sure amongst VC’s. But I believe AI is also a huge tailwind for video games. Namely, small, clever teams will be able to do big and entertaining things that were not possible before. (But yes there will also be tons of slop.)
- conartist6 9mo agoIt can't be a tailwind for a whole industry. It can only take from some and give to others.
- spacemarine1 9mo agoThe industry has experienced slowed growth and is restructuring which is scary for many people right now. There have been continuous layoffs and studio closures. That sucks (though is not all caused by AI). But a few quick thoughts: Video games have always been about cutting edge technology. Because they are interactive, they are best positioned to leverage AI tech. (unlike static media) Prototyping tends to be the most important but most neglected process for finding the fun. AI is a catalyst for rapid prototyping such that a studio can more quickly build and assess game loops and de-risk the rest of their dev cycle before staffing up or pulling team members off other projects. AI may long-term create more leisure time macro-economically for everyone, meaning more consumer time that may be consumed playing games. (Owen Mahoney thinks the industry will soon triple in size)
- conartist6 9mo ago1. "More leisure for everyone" is utter bollocks. We know it doesn't work like that. If it did we would all be doing nothing but leisure because of how much leisure we gained by switching to email. 2. Games are just code that's fun. How does this sounds as a process for making something fun: "Start by de-risking." Hmmm OK, yes, this tracks with my experience of private equity companies being the most innovative and successful creators of games.
- Zak 9mo agoTalking about the shift raises the question of why it used to be the other way. Were VCs bad at picking founders who were honest and/or competent, or were VCs always wrong to mistrust founders?
- spacemarine1 9mo agoIt was all of the above in my opinion. VC’s raised easy money (ZIRP era) and they wanted to deploy fast. Founders told VC’s what they wanted to hear to secure capital.
- seizethecheese 9mo agoI think it just seems like a bad idea? If you believe in expertise in business, giving someone with little of it a bunch of money seems a recipe for disaster. (And YC showed that in fact it’s not a disaster.)
- Zak 9mo agoTaken to its logical conclusion, that idea suggests hiring business experts to start companies from scratch rather than investing in existing startups.
- seizethecheese 9mo agoYeah, and Graham showed this is folly.
- tptacek 9mo agoThe VC-funded startup environment prior to YC is so different than what we have today that it's weird to compare. Were VCs bad at picking founders in 2004? Mu! (I raised, with friends, in 1999, and was senior at a VC-funded startup prior to that). Most people who comment on Hacker News would not have preferred the status quo ante of YC.
- throw-12-16 9mo agoIts never smart to trust people who have a vested interest in lying to you.
- contingencies 9mo agoTruth beyond the fold!
- mattmaroon 9mo ago“ Some say YC is now big enough that it has a self-fulfilling distortion effect where the best founders in the world know they should all apply to YC first before they talk to any other startup accelerators or investors.” That’s an interesting point but I have to imagine all the worst founders know it too so the filtering may not have gotten easier. I’d be curious to hear from them.
- YetAnotherNick 9mo agoThey majorly select a kind of founders as a first filter (good engineers from good companies, ivy league, ex founders etc.), and then they look into the ideas as a second filter, and the third and the least important is the process in which they just spend 15 minutes interviewing and maybe another 15 minutes looking into the application.
- onion2k 9mo agoThe zeroth filter is 'people who apply to YC' though, which YC can only really control by managing their brand and marketing and by approaching potential founders directly and suggesting they apply (I assume that happens; I don't know though). That limits who they can invest in far more than any of their own criteria. There's also another way in that circumvents all the other filters - being a founder at an existing startup that has really good traction already. You can have a resume of no-name companies, no degree, and never have founded a company before, but if your business is growing, making money, and looks wildly scalable with YC's support then you can get in that way.
- YetAnotherNick 9mo agoYes but the discussion was about it being hard for them to filter. They don't have to filter some startup which doesn't apply.
- intalentive 9mo agoThis mirrors the military doctrine of "mission tactics" which entrusts subordinates with wide latitude in executing orders. But it requires a high degree of alignment and competence, which explains why YC focuses on founders over product or idea. This makes sense in a dynamic environment with sensitive local conditions and "network lag" in the chain of command. But in more static or settled market environments it may be wiser (for investors) to focus elsewhere and restrict founder autonomy. We see this pretty commonly with successful founders who get "phased out" and replaced with more experienced managers. I wonder how much this sort of "distributed decision-making" has been formalized and studied.
- baxtr 9mo agoThere is a good book on that subject by Stephen Bungay called "The Art of Action". He explains the concept of Auftragstaktik. Great book, although a bit hard to read.
- Grosvenor 9mo agoThere's also Franz Osinga's book Scince, strategy, and war, which covers John Boyd's work in detail.
- MaysonL 9mo agoJohn Boyd, describer of the “OODA” loop: https://en.wikipedia.org/wiki/OODA_loop https://en.wikipedia.org/wiki/OODA_loop
- baxtr 9mo agoI think OODA is fundamentally different to Auftragstaktik. Auftragstaktik describes a clear purpose / intent. Like: capture the bridge (but: we don’t care how you do it since we can’t foresee specific circumstances) OODA describes a process of decision making. So, Auftragstaktik answers who decides what and why. OODA answers how decisions are made and updated over time. They’re complementary but different.
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- neilv 9mo agoBesides that, is YC building new trust? One recent concern I have is (anecdotally) how poor a deal YC startups I've seen are offering for founding engineers. Before YC started, early hires who helped make a startup successful could get rich on stock. YC may have changed the investment scene for the better in some ways, such that founders are less likely to screwed by investors. But today, early hires are the ones who seem to be getting screwed. In cases I've seen recently, even if the startup has a nice exit for founders and investors, employees would have been better off as a worker drone at a FAANG-like. Do we need PG to write an essay (or the richest managing partners to make a video), about the value of incentivizing early hires? Or, don't even talk about the value of it (since some aspiring founders are aggressively confident now, that they know how all the ducks are lined up), but talk about new criteria: YC looks for a respectable pool to incentivize early hires as positive signal, when determining who to fund.
- moomoo11 9mo agoBecause the truth is that recent batches are filled with nepo founders and companies that are not really at the caliber of those that carry these VC names from the past (like pre-2015). Lots of fraud-aligned people/companies too. Now its just a way to sell these companies to those OGs.
- dang 9mo agoIt's so easy to post substanceless slurs, but I've been around YC since 2009 and it hasn't changed much from my perspective. The primary difference between pre-2015 and now is that those earlier startups have been around for over a decade longer. Of course the ones who turned out to be successful are better known.
- moomoo11 9mo agoI'm just giving my opinion from what I see. In no way did I "slur" and my point isn't about YC but the founders.. you raise a valid point about survivorship bias I guess, but as of the last few years it seems a lot of rage bait and do anything to get signal instead of the positive optimism that I felt a lot of the companies offered those years ago. i guess what i'm trying to say is that it has become the final version of itself as a venture firm, whereas before it was quirky (again, I am outsider!! so this is my POV) and backed companies that made products/services that I think made my life objectively better. end of the day, I really like YC and think they do a good thing overall. but I think people/founders have realized how to game it, if that makes sense.
- neilv 9mo agoA related but slightly different impression of early YC that I mentioned the other day, touching on the "disingenous and exploitative finance" aspect this article alludes to: https://news.ycombinator.com/item?id=46437148 https://news.ycombinator.com/item?id=46437148 > This reminds me of when YC seemed to be a response to the dotcom boom environment, a bit "by hackers, for hackers", to help hackers start Internet businesses. Rather than mostly only the non-hackers starting dotcoms (such as with affluent family angel investors and connections). Or rather than hackers having to spend their energy jumping through a lot of hoops, while dealing with disingenuous and exploitative finance bro types.
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- balops 9mo agoSounds like damage control.
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- steele 9mo agoGiven the argument around YC effectively "cancelling" naughty list founders. The John Wick Excommunicado poster for illustration is an interesting choice because John Wick is the hero of the series and is constantly being threatened by the institution that both created and emancipated him only to try to destroy him later. Not sure how intentional, but Reeves himself is beloved figure and often noted as a paragon of hard work and integrity in a grimy industry despite a reputation as a "bad actor".
- spacemarine1 9mo agoI was just having some fun with the John Wick poster. I too have heard that Keanu is a good, honest human who works hard. PG does say he actually looks for “naughty” founders as one of the key filtering traits. I link this essay in my post. But you still have to be ethical and do what you say or it won’t be possible to grow your business long term. The gamer in me wonders if the “ideal founder” can be described as “chaotic good”?
- alsetmusic 9mo agoAnd yet YC still makes bets on pretty easily detected BS like Pickle VR[0]. That's a startup I sure wouldn't trust. Pickle is one of the most egregious examples, but I've noticed a trend of these fly-by-night operations with YC backing getting found out as frauds over the last handful of years. I don't know if it's happening more or if I just wasn't aware of them or if the rate was the same but people started talking about them more. 0. https://x.com/thedowd/status/2007337800430198913 https://x.com/thedowd/status/2007337800430198913
- Traster 9mo agoIt is the nature of YC that you're going to get instances like Pickle. YC invests at a very early stage in lots of companies. 40% are literally just an idea. It isn't a scam that one of the companies pivot, it's expected. They're meant to work on their idea, and if it doesn't work or they have a better idea they pivot. What Pickle is doing is essentially they're falling on the wrong line of "fake it to you make it", it would be totally fine to do what they're doing (allowing pre-orders with a $200 deposit for a Q4 '26 product) if they just weren't lying about the specs. It's pretty clear they aren't going to deliver anything like what they've promised, but that is just ambition. The whole point of YC is that 1 out of 1000 of these companies are going to deliver something revolutionary and you don't get that without 1000 of them trying to do something revolutionary. Having said that, you only need to watch the launch video to realise the CEO is total moron ("If everyone wore the same pair of glasses, what would they look like?"). But the way YC works, they don't actually have the power to tell Pickle what to do. YC are going to lose their investment on that company.
- philipwhiuk 9mo ago> It is the nature of YC that you're going to get instances like Pickle. YC invests at a very early stage in lots of companies. 40% are literally just an idea But the whole supposed point of YC is investing in people not founders. If that's the pitch and you invest in a moron, that makes you look bad too. YC should be good at telling if people are morons - that's kind of their entire job. > But the way YC works, they don't actually have the power to tell Pickle what to do. They get 7% of your company. They do actually have some power.
- paganel 9mo agoIs YC still an (upwards going) thing? Looks like their best days are behind them, I'd say 2018-2019 was its heyday. I don't feel bad for Paul Graham and his partners, I'm sure he's got his bag and then some, but from the outside it looks like it (the YC-adjacent thing, that is) lost big(-ish) when it came to riding the AI hype train.
- ludicrousdispla 9mo ago>> https://www.paulgraham.com/submarine.html https://www.paulgraham.com/submarine.html
- philipwhiuk 9mo ago> we were successfully acquired by Ziff Davis who owns IGN. Ah, now I know why the vibe of Humble Bundle changed. The first ones were truly fun packages with soul. Now they're churned out without feelings, it feels all algorithms.
- estimator7292 9mo agoThe last YC founder I trusted did $15k of wage theft against me, multiplied by ten employees.