6 ms·

Y Combinator, Silicon Valley’s Start-Up Machine

259 points by g_h 13y ago

markmccubbin 13y ago
This is really great. I worked along side these guys (strikingly) in the same cafe in SF, hacking away for a while before they got into YC. These guys are humble and really doing it right. They took what others just see as a clone of weebly and have added enough USP to prove that it's all execution. They had customers even while sitting in the little Cafe in SF and have growing fast through sheer force of will ! Biggest thing, humble, not afraid to ask for help and thick as thieves. These guys are what every entrepreneur should be trying to attain in a team !
- cmstoken 13y ago
  Do you know when Strikingly launched?
bly2425 13y ago
Now that's one inspiring story. $1600 a month in the Bay Area for 3 people? Holy shit. You gotta wonder how these guys did it...
- panther2k 13y ago
  It's doable but, as you would expect, it requires an extremely spartan lifestyle. I'm running about $500/month in SF and am no stranger couch surfing, lots of roommates, sleeping in my car, and (intelligently) fasting, etc. I could theoretically go even lower by purchasing lower quality food but I'm not willing to compromise my health. Once you've seen the worst-scenario first-hand you realize it's not that bad, and you can shoot for the moon without any fear.
  - eru 13y ago
    > and (intelligently) fasting, Go to the hinterland once a month for cheap gorging on good food; fast the rest of the month in SF?
tokenadult 13y ago
Previous submission with some comments: https://news.ycombinator.com/item?id=5643426 https://news.ycombinator.com/item?id=5643426
timjahn 13y ago
"In the weeks and months following Demo Day, those few who fail to attract enough interest must decide whether to begin a new company, find employment at Google or Facebook or persist and grow “organically” — an unsightly word in the valley of silicon." Really? That's it? Get funding or go home? Man. Those crazy entrepreneurs who persist and grow "organically." So unsightly.
cjbarber 13y ago
When they keep referring to $100,000 investments for 7%, this is a typo right? (YC usually does ~$10k)
- rdl 13y ago
  They mean $80k for YC VC ($20k each from Yuri Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital) plus the $14-20k from YC itself. The ~$20k is for 7% (of common stock); the $80k is under START Note terms, essentially convertible debt which inherits the cap/discount of the next note you do. It's conceivable that just means an uncapped note, so adds onto your Series A.
  - jordn 13y ago
    Do all the startups get the ~$80k VC money? And is that at the beginning of the batch or at the end? (This part isn't mentioned like the $14-20k funding is http://ycombinator.com/apply.html http://ycombinator.com/apply.html)
    - rdl 13y ago
      Everyone is offered it; as far as I know everyone has always taken it. I got mine around early July of the summer batch; I assume it's roughly the same still. If you really needed it early I'm sure you could arrange that.
- deleted 13y ago
  [deleted]
- frozenport 13y ago
  $100,000 is typical and it is not a lot of money: consider that it will be split 3 ways. This will leave you under the median household income.
  - logicallee 13y ago
    considering it's not income, it leaves you well below the median household income.
dr_ 13y ago
Having made several angel investments, I can tell you my eyes kind of roll when I hear the billion dollar valuation. It's very apparent when a startup has taken the number 1 billion and then just divided it by the potential number of users for its particular product and then by 12 months to come up with the monthly cost of the service. The last investment we made presented numbers that were far more modest, but we knew the team seemed highly capable and respected their honest assessment, so we went with it.
- spoiledtechie 13y ago
  Can I pitch you? I know it may sound like a small question, but I would love to have just one email sent between us. I have been running with my start up for about 9 months. Its almost ramen profitable. spoiledtechie with gmail
- sgrove 13y ago
  Do you mean TAM instead of valuation? That's a very strange way (if that's the only way) of defining a startup's valuation. Also, surely you wouldn't be angel investing in anything with a valuation anywhere near $1B, you'd never make any money.
  - dr_ 13y ago
    Correct, i meant tam, not valuation.
aashaykumar92 13y ago
Why are some investors losing interest in YC companies? It's not only noted in this article, but was also a topic of discussion after this past demo day. Is it because YC seems to be investing in less startups 'trying to hit the home run' like Airbnb, Dropbox, arguably Stripe now? To me, it's somewhat confusing because the companies are still solving pretty darn realistic problems and are doing so uniquely. [edit] this comment was posted (somewhat so) in the hopes that one of the partners will respond with their thoughts and if they plan to address this and if so, how so?
- batgaijin 13y ago
  Because the kids that are smart enough to do the next big thing are most likely smart enough to avoid VCs.
  - socksy 13y ago
    That doesn't sound like a compelling reason. If that's true now, that was at least as true before when the terms tended to be even worse for entrepreneurs. What's changed recently?
    - whatsup 13y ago
      what could be more compelling than the best people avoiding YC?
    - outside1234 13y ago
      It costs almost nothing to run a company in the cloud and the software infrastructure is so productive that you can realistically bootstrap yourself.
      - w1ntermute 13y ago
        That doesn't pay for development. Even if you have a non-technical cofounder who can pitch in for the development when necessary, you're going to hit a point where it's not enough. And it's not so easy to sell people on joining your company for equity when salaries are so high at large companies.
whatsup 13y ago
this article makes YC look ridiculous
plaxis 13y ago
Imagine if we could crowd fund this event!.. sigh.
- stck 13y ago
  Do you mean there's a need for https://wefunder.com/ https://wefunder.com/ ?
EGreg 13y ago
Probably the best article about YC I have read. Not sure if that's saying much given how many I read, but perhaps it is :)
- koops 13y ago
  I agree, it was beautifully written. I'll be looking for Mr. Rich's novel on the strength of it.
  - kmfrk 13y ago
    He's actually Frank Rich's son, so if you like his father, you'll probably take a liking to Nate's prose, too.
monsterix 13y ago
Guess this one looks like a post enthusiasm state but here is what I think is going on lately (Disclaimer: I am an entrepreneur, I feel this, so please take it all with a pinch of salt): It seems that the race to get into a coveted program like YC has become crowded. Almost every other startup that I met during last one year (50 odd in two cycles) had applied to the YC program [premise-A], some gotten the interview [premise-B] and some gotten into the program [premise-C]. Role of premise - A: Crowded race makes way for best YC 'applications', and I have seen PG/YC liking the way the quality of applications have gone up. Sure. However, the quality of application does not necessarily reflect the quality of technology startup. There are several areas where these two indices are not aligned perfectly: For example, there are people who can write and tell really high quality stories, given the amount of time at hand, but they're the ones who should probably be doing literature and not technology startup (rant?). Then there are other have-nots: The statistical bias of past YC batches seem to be away from the relatively older entrepreneurs or heterogeneous teams. This leaves out a bunch of gems. Long story short: A crowded race forces not-so-great start-ups to focus on getting into the program successfully and the great-ones to keep out/avoid/shy away and focus on building their business instead. And sometimes lose on what could have otherwise been a great partnership. Then the process is in two batches. Great companies were not built in batches so there seems to be a process conflict. Someone who is feeling great about their startup in June-July would be depressed by December when winter applications reopen. Perhaps a rolling-in applications model [1]? Role of premise - B: I know a couple of really awesome guys who went for their interviews and came back with a no. While there would have been genuine reasons, or simply bad luck, for these people getting rejected but I saw at least a few of them outgrowing their 'pariah' status and deciding to go for it and build it all by themselves. Cockroaches? How should I put this? This situation is like a river flowing across the plains. The river-bed gives shape and path to the flowing water, but flowing water too, in the long run, gives shape to the river bed and alters its course. Role of premise - C: There is role of who gets in, how many get in and how they do it. Given that the size of batches have gone up, I do believe that number of sentences exchanged with PG/partners per startup must have gone down. Or it is skewed between the white and black swans. And that could be a huge set-back for some. Make-or-break fluctuations are so tiny and yet so important. Even though this is a scalability challenge for an accelerator program like YC, but I guess there has to be a hard limit on how many are taken in. Which is bad because there is no limit on the number of applications though. I guess writing more on this will take a lot of time. These are some of the thoughts which I am sure are well understood at the combinator. It's just an outside-in view from where I am coming from. [1] http://techcrunch.com/2012/08/18/how-instacart-hacked-yc/ http://techcrunch.com/2012/08/18/how-instacart-hacked-yc/ [writing in progress]
bitsweet 13y ago
Spot on account of what pre demo day is like. Its been well over a year since demo day (W12), but reading that account was like reliving it all over as if it happened yesterday.
argonaut 13y ago
The tone and diction of the article really struck me as odd and unusual. 1. The heavy-handed metaphorical comparison of YC to a summer camp: "During that time, campers, or founders, have regular meetings with each of Y.C.’s counselors, or partners," "The director of this camp," " basketball-court-size dining hall," 2. "The Y.C. term culminates with Demo Day, or D Day." N̶o̶ ̶o̶n̶e̶ ̶a̶c̶t̶u̶a̶l̶l̶y̶ ̶c̶a̶l̶l̶s̶ ̶i̶t̶ ̶D̶ ̶D̶a̶y̶.̶ 3. "or persist and grow 'organically' — an unsightly word in the valley of silicon." - The correct word would be "bootstrap." - and it's a totally acceptable word in the tech circles I've been in. EDIT: Ah, I stand corrected. I worked at a YC company in the past and I had never heard anyone (the YC founders I met) call Demo Day as D-Day. The snark is really uncalled for.
- tptacek 13y ago
  You mean nobody calls it dday besides Paul Graham, all the time. There's a convenient little box you can ask for confirmation of that right at the bottom of this very page.
  - rdl 13y ago
    I've never heard pg actually call it "dday"; I didn't even realize he'd used it in writing on demo day a lot. I honestly would have assumed a reference to WW2 or some kind of military attack if someone said "are you ready for D-Day?" even in a startup context, or maybe a reference to a specific company's launch day, not demo day (by which time most companies have launched)
    - tptacek 13y ago
      All I'm saying is, you see the New York Times call YC Demo Day "D. Day" and then someone says they got it wrong because "nobody" calls it "D. Day" and your first response might be to go check that fact out, since that would be an extraordinarily weird mistake for them to make.
- foodmonster 13y ago
  The tone of this article is in fact a little different than most of what's on HN - as are most articles from the NYTimes Magazine. The magazine enjoys a much wider audience than most of the technology articles found here. Articles from the magazine are often framed as stories, following the path of individuals to show the purpose of the article. This also helps hold the attention of the reader through the article's longer length. The embellishments you list out here are other tools the writer and editors use to appeal to the magazine's reader base.
georgecmu 13y ago
It’s because of this power law: If a company has a 1 percent chance of being a hundred-billion-dollar company, then it’s worth about a billion dollars Really, is this a power law? Looks to me like a simplistic application of expected value.
- habosa 13y ago
  Also nobody really has even a 1% chance at becoming a 100B company. There have been very few of those in human history, the odds are << 1% even for a top YC company.
  - earbitscom 13y ago
    You're forgetting that they are talking about the companies getting $1B valuations, not all startups. If you line up 100 companies that are Instagrams, Pinterests, Facebooks (when it was valued at $1B), etc, one of them getting to $100B can absolutely be a 1% chance.
  - deleted 13y ago
    [deleted]
- nineteenturtles 13y ago
  The power law part is why the contribution of the other 99 percent of outcomes to the expected value is close to 0. If, for example, the distribution of outcomes was uniform between 0 and 100 billion, the startup would be worth 50 billion. Because the distribution roughly follows a power law, 1 billion is a better estimate.
- paul 13y ago
  I was explaining both the power law distribution and expected value, and somehow that all got mushed together into one quote, incorrectly unfortunately.
  - georgecmu 13y ago
    Yep, a classic case of broken telephone -- thanks for the clarification.
staunch 13y ago
...and now I have to sign up for hang gliding lessons. I also developed a fear of flying suddenly (after having flown something like 250k miles).
mmayberry 13y ago
Why did Teespring take $1.3M in funding if they were on pace to make $1M the following month? Why dilute your pool when your figure was just a month away (plus whatever else was saved) anyone have any insight?
- rdl 13y ago
  They didn't take "dumb money" -- they took money from people who would both make it easier for them to grow and who would make it easier to either raise huge amounts of future money (for expansion) or to sell the company in the future.
- earbitscom 13y ago
  Revenue does not equal profit and they want to scale quickly. They may have only $150k in profit on $1M in revenue and want to run operations at $250k in monthly expenses.
- wiwillia 13y ago
  Hi there - Walker from Teespring here. Both rdl and earbitscom are right. We took money to give ourselves the cushion we need to scale and aim big, and we raised it from people we believe can make a difference to our business. I'm writing a follow up to my first blog post (wiwillia.com) where I'll get a little more into the details of why we chose to raise.
  - mmayberry 13y ago
    cool. I liked part I. Looking forward to the follow up.
bifrost 13y ago
This article kind of reminds me of the stories bands and actors used to tell about hollywood. Moving somewhere, living cheap then hitting it big - albeit on a shorter timeframe. "How can a company that earns no money be worth a billion dollars?" - Hotmail. Those who forget history are doomed to repeat it :)
- lanstein 13y ago
  You mean HoTMaiL?
argumentum 13y ago
Good article. As a yc alum who's idea(s) didn't succeed (yet), it's pretty much on point on a lot of things. There is one thing factually wrong, or at least incomplete .. you don't get $100k (formerly $170k) for 7%. You get $11-20k for 2-10% plus $80k (formerly $150k) at an uncapped valuation. Usually that % will be low. The fundamental epiphany of YC/pg is that that we are no where near the limit on the # of startups .. and that encouraging hackers to become entrepreneurs is a win-win for hackers, investors, users and the world in general. YC will (continue to) be incredibly successful as long as it remains faithful to this. Also, never knew about pg's fear of flying .. very cool and inspiring thing to learn.
dcc1 13y ago
http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues_mtgox/ http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues...
moonfern 13y ago
On firefox aurora it runs between 40 and 60 fps (intel hd 2000 ). The dedicated memory (65 mb) of that card is all the time the limit.
brryant 13y ago
q: I wonder why Nikes are shunned in favor of Asics?
jokoon 13y ago
french, unemployed guy here. I envy you guys
rodrigoavie 13y ago
Amazing article! What I find particularly interesting in this is not that it highlights how awesome YC is and all that talk (I'm not saying that YC isn't awesome, I'm much inclined to believe that it is) but how startups offer a way for individuals to work with that they like more and how more and more people are embracing entrepreneurship and how technology plays such an important field in this.
blantonl 13y ago
pg, did this article accurately portray the YC process?

259 points by g_h 13y ago

This is really great. I worked along side these guys (strikingly) in the same cafe in SF, hacking away for a while before they got into YC. These guys are humble and really doing it right. They took what others just see as a clone of weebly and have added enough USP to prove that it's all execution. They had customers even while sitting in the little Cafe in SF and have growing fast through sheer force of will ! Biggest thing, humble, not afraid to ask for help and thick as thieves. These guys are what every entrepreneur should be trying to attain in a team !

cmstoken 13y ago
Do you know when Strikingly launched?

bly2425 13y ago

Now that's one inspiring story. $1600 a month in the Bay Area for 3 people? Holy shit. You gotta wonder how these guys did it...

panther2k 13y ago
It's doable but, as you would expect, it requires an extremely spartan lifestyle. I'm running about $500/month in SF and am no stranger couch surfing, lots of roommates, sleeping in my car, and (intelligently) fasting, etc. I could theoretically go even lower by purchasing lower quality food but I'm not willing to compromise my health. Once you've seen the worst-scenario first-hand you realize it's not that bad, and you can shoot for the moon without any fear.
- eru 13y ago
  > and (intelligently) fasting, Go to the hinterland once a month for cheap gorging on good food; fast the rest of the month in SF?

tokenadult 13y ago

Previous submission with some comments: https://news.ycombinator.com/item?id=5643426 https://news.ycombinator.com/item?id=5643426

timjahn 13y ago

"In the weeks and months following Demo Day, those few who fail to attract enough interest must decide whether to begin a new company, find employment at Google or Facebook or persist and grow “organically” — an unsightly word in the valley of silicon." Really? That's it? Get funding or go home? Man. Those crazy entrepreneurs who persist and grow "organically." So unsightly.

cjbarber 13y ago

When they keep referring to $100,000 investments for 7%, this is a typo right? (YC usually does ~$10k)

rdl 13y ago
They mean $80k for YC VC ($20k each from Yuri Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital) plus the $14-20k from YC itself. The ~$20k is for 7% (of common stock); the $80k is under START Note terms, essentially convertible debt which inherits the cap/discount of the next note you do. It's conceivable that just means an uncapped note, so adds onto your Series A.
- jordn 13y ago
  Do all the startups get the ~$80k VC money? And is that at the beginning of the batch or at the end? (This part isn't mentioned like the $14-20k funding is http://ycombinator.com/apply.html http://ycombinator.com/apply.html)
  - rdl 13y ago
    Everyone is offered it; as far as I know everyone has always taken it. I got mine around early July of the summer batch; I assume it's roughly the same still. If you really needed it early I'm sure you could arrange that.
deleted 13y ago
[deleted]
frozenport 13y ago
$100,000 is typical and it is not a lot of money: consider that it will be split 3 ways. This will leave you under the median household income.
- logicallee 13y ago
  considering it's not income, it leaves you well below the median household income.

dr_ 13y ago

Having made several angel investments, I can tell you my eyes kind of roll when I hear the billion dollar valuation. It's very apparent when a startup has taken the number 1 billion and then just divided it by the potential number of users for its particular product and then by 12 months to come up with the monthly cost of the service. The last investment we made presented numbers that were far more modest, but we knew the team seemed highly capable and respected their honest assessment, so we went with it.

spoiledtechie 13y ago
Can I pitch you? I know it may sound like a small question, but I would love to have just one email sent between us. I have been running with my start up for about 9 months. Its almost ramen profitable. spoiledtechie with gmail
sgrove 13y ago
Do you mean TAM instead of valuation? That's a very strange way (if that's the only way) of defining a startup's valuation. Also, surely you wouldn't be angel investing in anything with a valuation anywhere near $1B, you'd never make any money.
- dr_ 13y ago
  Correct, i meant tam, not valuation.

aashaykumar92 13y ago

Why are some investors losing interest in YC companies? It's not only noted in this article, but was also a topic of discussion after this past demo day. Is it because YC seems to be investing in less startups 'trying to hit the home run' like Airbnb, Dropbox, arguably Stripe now? To me, it's somewhat confusing because the companies are still solving pretty darn realistic problems and are doing so uniquely. [edit] this comment was posted (somewhat so) in the hopes that one of the partners will respond with their thoughts and if they plan to address this and if so, how so?

batgaijin 13y ago
Because the kids that are smart enough to do the next big thing are most likely smart enough to avoid VCs.
- socksy 13y ago
  That doesn't sound like a compelling reason. If that's true now, that was at least as true before when the terms tended to be even worse for entrepreneurs. What's changed recently?
  - whatsup 13y ago
    what could be more compelling than the best people avoiding YC?
  - outside1234 13y ago
    It costs almost nothing to run a company in the cloud and the software infrastructure is so productive that you can realistically bootstrap yourself.
    - w1ntermute 13y ago
      That doesn't pay for development. Even if you have a non-technical cofounder who can pitch in for the development when necessary, you're going to hit a point where it's not enough. And it's not so easy to sell people on joining your company for equity when salaries are so high at large companies.

whatsup 13y ago

this article makes YC look ridiculous

plaxis 13y ago

Imagine if we could crowd fund this event!.. sigh.

stck 13y ago
Do you mean there's a need for https://wefunder.com/ https://wefunder.com/ ?

EGreg 13y ago

Probably the best article about YC I have read. Not sure if that's saying much given how many I read, but perhaps it is :)

koops 13y ago
I agree, it was beautifully written. I'll be looking for Mr. Rich's novel on the strength of it.
- kmfrk 13y ago
  He's actually Frank Rich's son, so if you like his father, you'll probably take a liking to Nate's prose, too.

monsterix 13y ago

Guess this one looks like a post enthusiasm state but here is what I think is going on lately (Disclaimer: I am an entrepreneur, I feel this, so please take it all with a pinch of salt): It seems that the race to get into a coveted program like YC has become crowded. Almost every other startup that I met during last one year (50 odd in two cycles) had applied to the YC program [premise-A], some gotten the interview [premise-B] and some gotten into the program [premise-C]. Role of premise - A: Crowded race makes way for best YC 'applications', and I have seen PG/YC liking the way the quality of applications have gone up. Sure. However, the quality of application does not necessarily reflect the quality of technology startup. There are several areas where these two indices are not aligned perfectly: For example, there are people who can write and tell really high quality stories, given the amount of time at hand, but they're the ones who should probably be doing literature and not technology startup (rant?). Then there are other have-nots: The statistical bias of past YC batches seem to be away from the relatively older entrepreneurs or heterogeneous teams. This leaves out a bunch of gems. Long story short: A crowded race forces not-so-great start-ups to focus on getting into the program successfully and the great-ones to keep out/avoid/shy away and focus on building their business instead. And sometimes lose on what could have otherwise been a great partnership. Then the process is in two batches. Great companies were not built in batches so there seems to be a process conflict. Someone who is feeling great about their startup in June-July would be depressed by December when winter applications reopen. Perhaps a rolling-in applications model [1]? Role of premise - B: I know a couple of really awesome guys who went for their interviews and came back with a no. While there would have been genuine reasons, or simply bad luck, for these people getting rejected but I saw at least a few of them outgrowing their 'pariah' status and deciding to go for it and build it all by themselves. Cockroaches? How should I put this? This situation is like a river flowing across the plains. The river-bed gives shape and path to the flowing water, but flowing water too, in the long run, gives shape to the river bed and alters its course. Role of premise - C: There is role of who gets in, how many get in and how they do it. Given that the size of batches have gone up, I do believe that number of sentences exchanged with PG/partners per startup must have gone down. Or it is skewed between the white and black swans. And that could be a huge set-back for some. Make-or-break fluctuations are so tiny and yet so important. Even though this is a scalability challenge for an accelerator program like YC, but I guess there has to be a hard limit on how many are taken in. Which is bad because there is no limit on the number of applications though. I guess writing more on this will take a lot of time. These are some of the thoughts which I am sure are well understood at the combinator. It's just an outside-in view from where I am coming from. [1] http://techcrunch.com/2012/08/18/how-instacart-hacked-yc/ http://techcrunch.com/2012/08/18/how-instacart-hacked-yc/ [writing in progress]

bitsweet 13y ago

Spot on account of what pre demo day is like. Its been well over a year since demo day (W12), but reading that account was like reliving it all over as if it happened yesterday.

argonaut 13y ago

The tone and diction of the article really struck me as odd and unusual. 1. The heavy-handed metaphorical comparison of YC to a summer camp: "During that time, campers, or founders, have regular meetings with each of Y.C.’s counselors, or partners," "The director of this camp," " basketball-court-size dining hall," 2. "The Y.C. term culminates with Demo Day, or D Day." N̶o̶ ̶o̶n̶e̶ ̶a̶c̶t̶u̶a̶l̶l̶y̶ ̶c̶a̶l̶l̶s̶ ̶i̶t̶ ̶D̶ ̶D̶a̶y̶.̶ 3. "or persist and grow 'organically' — an unsightly word in the valley of silicon." - The correct word would be "bootstrap." - and it's a totally acceptable word in the tech circles I've been in. EDIT: Ah, I stand corrected. I worked at a YC company in the past and I had never heard anyone (the YC founders I met) call Demo Day as D-Day. The snark is really uncalled for.

tptacek 13y ago
You mean nobody calls it dday besides Paul Graham, all the time. There's a convenient little box you can ask for confirmation of that right at the bottom of this very page.
- rdl 13y ago
  I've never heard pg actually call it "dday"; I didn't even realize he'd used it in writing on demo day a lot. I honestly would have assumed a reference to WW2 or some kind of military attack if someone said "are you ready for D-Day?" even in a startup context, or maybe a reference to a specific company's launch day, not demo day (by which time most companies have launched)
  - tptacek 13y ago
    All I'm saying is, you see the New York Times call YC Demo Day "D. Day" and then someone says they got it wrong because "nobody" calls it "D. Day" and your first response might be to go check that fact out, since that would be an extraordinarily weird mistake for them to make.
foodmonster 13y ago
The tone of this article is in fact a little different than most of what's on HN - as are most articles from the NYTimes Magazine. The magazine enjoys a much wider audience than most of the technology articles found here. Articles from the magazine are often framed as stories, following the path of individuals to show the purpose of the article. This also helps hold the attention of the reader through the article's longer length. The embellishments you list out here are other tools the writer and editors use to appeal to the magazine's reader base.

georgecmu 13y ago

It’s because of this power law: If a company has a 1 percent chance of being a hundred-billion-dollar company, then it’s worth about a billion dollars Really, is this a power law? Looks to me like a simplistic application of expected value.

habosa 13y ago
Also nobody really has even a 1% chance at becoming a 100B company. There have been very few of those in human history, the odds are << 1% even for a top YC company.
- earbitscom 13y ago
  You're forgetting that they are talking about the companies getting $1B valuations, not all startups. If you line up 100 companies that are Instagrams, Pinterests, Facebooks (when it was valued at $1B), etc, one of them getting to $100B can absolutely be a 1% chance.
- deleted 13y ago
  [deleted]
nineteenturtles 13y ago
The power law part is why the contribution of the other 99 percent of outcomes to the expected value is close to 0. If, for example, the distribution of outcomes was uniform between 0 and 100 billion, the startup would be worth 50 billion. Because the distribution roughly follows a power law, 1 billion is a better estimate.
paul 13y ago
I was explaining both the power law distribution and expected value, and somehow that all got mushed together into one quote, incorrectly unfortunately.
- georgecmu 13y ago
  Yep, a classic case of broken telephone -- thanks for the clarification.

staunch 13y ago

...and now I have to sign up for hang gliding lessons. I also developed a fear of flying suddenly (after having flown something like 250k miles).

mmayberry 13y ago

Why did Teespring take $1.3M in funding if they were on pace to make $1M the following month? Why dilute your pool when your figure was just a month away (plus whatever else was saved) anyone have any insight?

rdl 13y ago
They didn't take "dumb money" -- they took money from people who would both make it easier for them to grow and who would make it easier to either raise huge amounts of future money (for expansion) or to sell the company in the future.
earbitscom 13y ago
Revenue does not equal profit and they want to scale quickly. They may have only $150k in profit on $1M in revenue and want to run operations at $250k in monthly expenses.
wiwillia 13y ago
Hi there - Walker from Teespring here. Both rdl and earbitscom are right. We took money to give ourselves the cushion we need to scale and aim big, and we raised it from people we believe can make a difference to our business. I'm writing a follow up to my first blog post (wiwillia.com) where I'll get a little more into the details of why we chose to raise.
- mmayberry 13y ago
  cool. I liked part I. Looking forward to the follow up.

bifrost 13y ago

This article kind of reminds me of the stories bands and actors used to tell about hollywood. Moving somewhere, living cheap then hitting it big - albeit on a shorter timeframe. "How can a company that earns no money be worth a billion dollars?" - Hotmail. Those who forget history are doomed to repeat it :)

lanstein 13y ago
You mean HoTMaiL?

argumentum 13y ago

Good article. As a yc alum who's idea(s) didn't succeed (yet), it's pretty much on point on a lot of things. There is one thing factually wrong, or at least incomplete .. you don't get $100k (formerly $170k) for 7%. You get $11-20k for 2-10% plus $80k (formerly $150k) at an uncapped valuation. Usually that % will be low. The fundamental epiphany of YC/pg is that that we are no where near the limit on the # of startups .. and that encouraging hackers to become entrepreneurs is a win-win for hackers, investors, users and the world in general. YC will (continue to) be incredibly successful as long as it remains faithful to this. Also, never knew about pg's fear of flying .. very cool and inspiring thing to learn.

dcc1 13y ago

http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues_mtgox/ http://www.reddit.com/r/Bitcoin/comments/1dl6uz/coinlab_sues...

moonfern 13y ago

On firefox aurora it runs between 40 and 60 fps (intel hd 2000 ). The dedicated memory (65 mb) of that card is all the time the limit.

brryant 13y ago

q: I wonder why Nikes are shunned in favor of Asics?

jokoon 13y ago

french, unemployed guy here. I envy you guys

rodrigoavie 13y ago

Amazing article! What I find particularly interesting in this is not that it highlights how awesome YC is and all that talk (I'm not saying that YC isn't awesome, I'm much inclined to believe that it is) but how startups offer a way for individuals to work with that they like more and how more and more people are embracing entrepreneurship and how technology plays such an important field in this.

blantonl 13y ago

pg, did this article accurately portray the YC process?