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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

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.
      - batgaijin 13y ago
        Uh... the next big ideas aren't going to be the first thing out the door. If they are smart they would create something for passive income with low maintainability while working on the real product. There is a meme where running a startup is like gambling where the only option is going all in, both for participating in the startup and for the ideas they execute. Quit huffing the glue, and pass the glue.
        w1ntermute 13y ago
        Uh...you clearly have never worked at a startup with a severe need for more developers. And I'm not talking about the next Instagram. There are legitimate needs for more developers in many startups that are working on real problems. If you can accelerate the growth of your business by taking VC money and hiring more people, why wouldn't you? Contrary to your first statement, there are plenty of startups in markets that are currently in "landgrab" mode.
        rhizome 13y ago
        If you can accelerate the growth of your business by taking VC money and hiring more people, why wouldn't you? Brooks' Law, for one thing. I if I was in the situation you describe, I would try more to use the money to buy time, not so much people.
        w1ntermute 13y ago
        That makes no sense. By definition, if you can accelerate the growth of your business by hiring more people, then it is a case in which Brook's Law doesn't apply. It is a common misconception that Brook's Law applies to all software projects. It does not. I can think of several real situations where it does not.
        rhizome 13y ago
        "Growth of your business" is a particularly nebulous term in this (your?) equation, can you clarify how it applies in this context? Is it possible you're identifying a follow-on effect where funding would allow a company to buy both headcount and time with which to get the new people up to speed? Making a late project later is only an observation, and speaks nothing to how hard or soft (invented) deadlines might be within a particular company.
  - 3327 13y ago
    I don't want to agree but I do. If you had a job out of college and didn't squander your money (as we are assuming the existence of intelligence) bootstrapping a good idea together is very cheap. If they have been at it and the idea is good and solves critical mass problems and other start-up problems within it why should he/she/they go to a VC? The current stage: VC's come in, or, like to come in when the startup appears to not even need them. If it is already growing, adding users and all thats needed to make that grow exponential is throwing cash at it they love to come in.
infinitone 13y ago
> because the companies are still solving pretty darn realistic problems and are doing so uniquely. That is pretty arguable and not definite.
pg 13y ago
Because whenever a reporter asks investors at Demo Day for a comment, and they ask themselves "what could I say that would be in my interest to have reprinted?" the obvious choice is "prices are coming down." And it's not true, incidentally. We don't have all the data yet but it's clear valuations remained high last batch.
- omegant 13y ago
  If they make it a meme, eventually valuations will go down, as VCs will be influenced by the general "mood"(at least a portion of them will).
  - raldi 13y ago
    Hey, did you hear the suit is back?
earbitscom 13y ago
The competitive aspect of demo day and investing in YC companies drives prices up. Investors are trying to maximize returns and some may feel these prices are not justified or that their capital can be put to better use investing in a company with similar results and a lower price tag. I do think this can be a mistake because the resources a YC company has at their disposal can increase their odds of success and create opportunities other companies will struggle to secure. I know that we have had more opportunities because of our YC status and that has made our company more valuable.

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.
    - batgaijin 13y ago
      Uh... the next big ideas aren't going to be the first thing out the door. If they are smart they would create something for passive income with low maintainability while working on the real product. There is a meme where running a startup is like gambling where the only option is going all in, both for participating in the startup and for the ideas they execute. Quit huffing the glue, and pass the glue.
      - w1ntermute 13y ago
        Uh...you clearly have never worked at a startup with a severe need for more developers. And I'm not talking about the next Instagram. There are legitimate needs for more developers in many startups that are working on real problems. If you can accelerate the growth of your business by taking VC money and hiring more people, why wouldn't you? Contrary to your first statement, there are plenty of startups in markets that are currently in "landgrab" mode.
        rhizome 13y ago
        If you can accelerate the growth of your business by taking VC money and hiring more people, why wouldn't you? Brooks' Law, for one thing. I if I was in the situation you describe, I would try more to use the money to buy time, not so much people.
        w1ntermute 13y ago
        That makes no sense. By definition, if you can accelerate the growth of your business by hiring more people, then it is a case in which Brook's Law doesn't apply. It is a common misconception that Brook's Law applies to all software projects. It does not. I can think of several real situations where it does not.
        rhizome 13y ago
        "Growth of your business" is a particularly nebulous term in this (your?) equation, can you clarify how it applies in this context? Is it possible you're identifying a follow-on effect where funding would allow a company to buy both headcount and time with which to get the new people up to speed? Making a late project later is only an observation, and speaks nothing to how hard or soft (invented) deadlines might be within a particular company.
- 3327 13y ago
  I don't want to agree but I do. If you had a job out of college and didn't squander your money (as we are assuming the existence of intelligence) bootstrapping a good idea together is very cheap. If they have been at it and the idea is good and solves critical mass problems and other start-up problems within it why should he/she/they go to a VC? The current stage: VC's come in, or, like to come in when the startup appears to not even need them. If it is already growing, adding users and all thats needed to make that grow exponential is throwing cash at it they love to come in.

infinitone 13y ago

> because the companies are still solving pretty darn realistic problems and are doing so uniquely. That is pretty arguable and not definite.

pg 13y ago

Because whenever a reporter asks investors at Demo Day for a comment, and they ask themselves "what could I say that would be in my interest to have reprinted?" the obvious choice is "prices are coming down." And it's not true, incidentally. We don't have all the data yet but it's clear valuations remained high last batch.

omegant 13y ago
If they make it a meme, eventually valuations will go down, as VCs will be influenced by the general "mood"(at least a portion of them will).
- raldi 13y ago
  Hey, did you hear the suit is back?

earbitscom 13y ago

The competitive aspect of demo day and investing in YC companies drives prices up. Investors are trying to maximize returns and some may feel these prices are not justified or that their capital can be put to better use investing in a company with similar results and a lower price tag. I do think this can be a mistake because the resources a YC company has at their disposal can increase their odds of success and create opportunities other companies will struggle to secure. I know that we have had more opportunities because of our YC status and that has made our company more valuable.