19 ms·

Paul Graham on Building Companies for Fast Growth

250 points by shakes 13y ago

pg 13y ago
That's a very Kate Courteau picture incidentally. She's our architect, and is the reason YC looks so distinctive. It's hard to get simple right, but she does.
- thetrumanshow 13y ago
  I would love to have a high-res version of that. If you're in a Q/A mood, I'm curious: When you start to see one of the YC batch companies struggling... what does an intervention look like?
- brianjesse 13y ago
  I love the way she used a super wide shot to pull in so many graphic elements - beautifully done, Kate Courteau.
  - brianjesse 13y ago
    oh I see now that she didn't take the actual picture but Jason Madara did that -
    - brudgers 13y ago
      Like food styling, architectural photography is a discipline unto itself.
- hnriot 13y ago
  I don't see anything very distinctive. Aside from the usual colorful doors == sf startup, the place (from that photograph) looks just like any other startup space (except darker, but that's likely because it would have made taking that photo difficult if the background were bright)
larrys 13y ago
" If a place has really good food, it can be in an obscure location, charge a lot, and have really bad service, and it will still be popular. If it has bad food, boy, it better do something really special to get anybody in there." The "special" can be "location". Food on the NJ Turnpike (or similar) is an example of a captive market where quality of food is not the key ingredient but landing the contract and being merely acceptable can still be very profitable. Likewise being in Times Square, if you can afford the rent, can be profitable because you are not worried about repeat business but simply grabbing the tourists that will only be a customer one time.
- LogicX 13y ago
  I see the times square trend in Myrtle Beach, in a slightly different way: poorly run (which includes bad food) restaurants can be open only seasonal, get sufficient 'incidental' business to survive and then shut down during the off season due to low property costs. I suspect eventually property valuations will make it too attractive to sell out to more profitable business, whether thats due to being better run or all-year.
- rustynails77 13y ago
  Just to be clear, this rule doesn't work for McDonalds - as it's an established brand. Their food is awful, but the place tends to be clean and tidy - with a toilet. Interestingly, where I live, Burger Kings tend to be filthy and poorly maintained, with slightly better tasting food. They are also popular - so cleanliness doesn't seem to be a major contributor.
  - jonnathanson 13y ago
    McDonalds' food is awful by what standard, precisely? From a health standpoint, sure. From the standpoint of a foodie, yes. From the standpoint of pretty much anyone who is accustomed to nicer food, in nicer circumstances, sure. But McDonalds isn't competing on the dimension of "quality" as other restaurants might define that term. McDonalds is competing on scale and consistency. A Big Mac [1] in Jakarta tastes identical to a Big Mac in Cleveland. A pack of fries in Moscow tastes identical to a pack of fries in Istanbul. If you walk into a McDonalds in any part of the world, barring a few local specialties on the menu, you know exactly what you're going to get, and exactly when you're going to get it. That's pretty damned remarkable. McDonalds runs a marketing and logistics company, not a restaurant chain. [1] Insert Pulp Fiction reference here.
larrys 13y ago
"He is brilliant and hilariously funny." How is being hilariously funny an advantage in terms of working for YC?
- asolove 13y ago
  Presumably being likable is important when you're trying to make business deals. Plus, if you are doing well and earning more money that is necessary, you can probably afford to optimize for other things, like enjoying the people you work with.
- pg 13y ago
  That's actually a very interesting question. I've noticed for a while that the people who are best at giving advice to startups tend to be funny. It's not a job where it would be good to be the humorless variety of smart. I think the reason is not that being funny is important per se, but that being funny and having good ideas about startups are so similar that it's impossible to find one without the other.
  - deleted 13y ago
    [deleted]
  - larrys 13y ago
    Would add that humor to me is linked to being liked which is important in getting people to do what you want them to do or listen to you.. And being liked is related to at least two things [1]. One is having lots of people who want to be around you which can be an advantage (you can get people to help you and do things for you it's like being the "pretty" girl). Of course it can also be a big distraction (you are funny and people want to spend time with you so you are less inclined to stay in side and study or hack at something). In terms of someone listening to you humor is like an anesthetic that puts people at ease and makes them more inclined to at least hear you out (that is if they don't take you as being a complete goofball). And perhaps the mental state that a good joke puts them in makes it less likely that they will be defensive and opens them up. (An example is my wife who I can never get mad at because she is always following up with humor to anything that goes wrong.) I could also stretch and add that being funny provides social proof since the group as a whole likes or appears to like the funny person giving advice. [1] Strictly my observations over time.
pcunite 13y ago
With hands in pocket he has not been captured mid motion. He is therefore purposefully guarding entrance into the "Y". The blue exit door is for anyone who cannot answer his questions three.
- gfodor 13y ago
  "What have you made?" "Who wants it?" "How do you know?"
mathattack 13y ago
"We were the kind of start-up started by nerds who were really good at programing and really, really bad at sales and business. Now I would know exactly what to tell my previous self, which is that I should be spending all my time selling." Is this a case of playing to your personal weakness, or is it playing to your personal blind spot? In either case, how long until you say, "This is important, but I'm not good at it. I have to bring someone in to do it while teaching me." My impression is a good salesperson quickly pays for themselves.
- akbar501 13y ago
  In my experience, a good salesperson is either a total drag or big boost. The total drag happens when a salesperson is brought on too soon. When the product is not aligned with the market (pre-product/market fit), there is little a good salesperson can do. In this situation, everyone gets frustrated as success does not happen and costs increase. Post-product/market fit, a good salesperson can certainly accelerate growth. The use of the word "accelerate" here is deliberate as the founder(s) should be the ones to spark growth. Initial sales should always be made by the founders for several reasons: 1. Your initial idea is likely misaligned with the market. The only way to figure this out is to be listen directly to customer's rejections and stall tactics. 2. Customer's will initially be positive (before you ask for money or ask them to do something), and watching this change from positive/supportive to neutral/negative forces a good reality check. 3. The founder(s) bring the most excitement to the sales process. You need to be the spark for interest/excitement about the solution. Salespeople will then feed off of your excitement.
  - mathattack 13y ago
    Fair enough - you don't need them too soon. But in this instance, the starting point is the founder deciding (in hindsight) that spending all of their time in Sales would be good.
ngoel36 13y ago
"One quality that's a really bad indication is a CEO with a strong foreign accent...they must just be clueless if they haven't gotten rid of their strong accent." I'm curious to learn more about this. I'm certainly not accusing YC/PG of being racist in the least, but although I don't have an accent, I feel like I know numerously brilliantly smart people with heavy accents, many of whom happen to be Indian-born Stanford students or Google employees. I think we all know that "brilliantly smart" doesn't necessarily correlate with "great CEO", but it has to suck that something like your own accent puts you at a huge disadvantage applying to YC.
- infoseckid 13y ago
  Me too! I would have thought there could be so many things in the number 1 spot ... and then this :)
  - davidw 13y ago
    Err... if you read the article, he says "one quality", not "the number one". Also, it's worth considering that this is something that has jumped at them only after a number of batches of YC, not something that they started out with, so it is, in some way, based on actual data. They probably already filter out people based on any number of more important criteria.
    - infoseckid 13y ago
      If found it worth a mention for a worldwide released article ... I am sure its pretty high on his list
- soneca 13y ago
  I think the difficulties of communication, specially during incubation time and demo day, justify this qualifying as a bad indication. A great deal of YC value lies in the office hours and everyone has some bias to listen what they want to listen on a feedback session and to create excuses as "they didn't quite get my idea, that is why they are pointing these errors". When mentors actually don't understand them and vice-versa, this may totally nullify a feedback session. Networking on Demo Day (and subsequently fundraising meetings) also is seriously jeopardized. How to look formidable when you can't even sound "right". But on the other hand, this shows a way of doing business that SV still suffers from: they are too west centered. These companies build things to US market and, sometimes, Europe. South America usually follow-up as we (i am brazilian) are very connected to US culture. But even we have our thriving copycat companies. But if you take Russia and China into account, then they often have juggernauts versions of SV companies (not regular copycats, but dominant companies) that the original ones just can't easily beat when they try. I don't think there is causality here, just guessing that they are both reflects of a particular trace of SV companies: US is the Total Adressable Market. So, if you don't completely fit with the US culture, you will likely fail as a startup CEO in SV (for pragmatic reasons, not any "racist" bias or anything like that). At the same time, these companies usually take a little too long time to expand internationally. This a diferentiation that 500startups have that, in my opinion, will pay large benefits to them eventually.
davidw 13y ago
> There is a secular trend going on, in which launching a start-up is a more common thing to do. It used to be there were two things you could do after college: go to grad school or get a job. Soon, I think there will be three things: go to grad school, get a job, or start your own company. I suspect this will be one of these economic transformations on the scale of the industrial revolution. That's a very interesting topic, and is something I wonder about too. Historically speaking, the amount of capital required to start an internet company these days is amazingly low. Will this last? Maybe in the future, to even get started, people will need more horsepower in terms of servers, or storage, or something like that, and this low-capital period will be seen as an anomaly. Or maybe the trend will continue and spread to other fields. Are there others that are ripe for a similar transformation, where it gets super easy to start something new? Also, I like this quote/thinking: > The way you'll get big ideas in, say, health care is by starting out with small ideas. If you try to do some big thing, you don't just need it to be big; you need it to be good. And it's really hard to do big and good simultaneously. So, what that means is you can either do something small and good and then gradually make it bigger, or do something big and bad and gradually make it better. And you know what? Empirically, starting big just does not work.
sunir 13y ago
I'm really disappointed that this was Paul's top of mind criterion for rejection, "One quality that's a really bad indication is a CEO with a strong foreign accent." That reminds me of an incident earlier in my career when a recruiter ranked candidates on their 'communication skills', which really was a proxy for whether they were an immigrant or not, in order to try to avoid discrimination laws. http://www.freshbooks.com/blog/2007/07/23/immigrant-quebecois-newfoundlanders-not-wanted/ http://www.freshbooks.com/blog/2007/07/23/immigrant-quebecoi... Besides, it's failing to communicate clearly and be understood that makes a bad leader, regardless of the behavioural cause (foreign accent, mumbling, random trains of thought).
- auganov 13y ago
  Having a strong accent can make it much harder to communicate. I don't know if statistically true, but from my experience most of people with bad accents tend to use the language less effectively too. If you're in tech you probably use English everyday if not all the time. With that amount of immersion it's just kind of hard not to be at least mediocre. Also there's this immense sense of quality about people that speak a foreign language super well. I think pg meant strong foreign accent combined with usage that just doesn't feel native. Which I feel is strongly correlated.
- pg 13y ago
  It's not our top criterion. It's just one that I'm willing to talk about publicly, because there's no way to fake it. We're not against funding people from outside the US, and we fund a lot of them. But 564 startups is enough to see patterns, and the empirical evidence about very strong accents is striking. And I am talking about failure to communicate here. I don't mean strong accents in the sense that it's clear that someone comes from another country. I'm talking about accents so strong that you have to interrupt the conversation to ask what they just said.
  - c0mpute 13y ago
    According to this article, 14% of the top 500 CEOs are non-native to the company's homeland. http://money.cnn.com/gallery/leadership/2013/07/08/global-500-non-native-ceos.fortune/index.html http://money.cnn.com/gallery/leadership/2013/07/08/global-50... Even empirically your dataset consists of startups that target USA markets mostly and hence this conclusion. I am guessing CEOs are good and can come from anywhere, its perhaps "sales" that really needs the idiomatic speak.
bfe 13y ago
"Nobody knows what they're capable of until they try it. Maybe half a percent of people have the brains and sheer determination to do this kind of thing. Start-ups are hard but doable, in the way that running a five-minute mile is hard but doable." Worth remembering.
unono 13y ago
Does anyone know what has been PG's ROI on his investments is, for all we know it could be below industry standard. Also, by PG's own words he only invests in the relentlessly resourceful. What do they need PG and later round VC's for? I always get the feeling with PG that something hidden is at play, he's a really really clever guy. There's a sucker getting played when he's around. (For example, Zuckerburg is not as smart as PG keeps enthusing, there's a lot smarter guys than him, so I think he's got some sell YC companies to Facebook flow going on. Another, Andrew Mason is just a terrible business guy - why is PG linking with him - probably experience at knowing how to keep investors from realizing what's actually happening).
- arbuge 13y ago
  >> Does anyone know what has been PG's ROI on his investments is, for all we know it could be below industry standard. Hell no. Just do the math: http://ycombinator.com/nums.html http://ycombinator.com/nums.html The total value of YC companies is more like $12B today. That makes their average 6% stake worth around $700m or so. Around 600 companies total, at around $20k each - a total investment of just $12m or so by my calculations. $12m to $700m in <10 years is about as good as it gets in investing.
  - unono 13y ago
    If that's true, then that's astounding. Why isn't some huge wall street fund swooping in to this? Do people not know. The White House should be calling in PG for advice.
    - patio11 13y ago
      That's a good question. The main reason is that the hypothetical Huge Wall Street Firm doesn't see a way to reproduce the project at scale. They don't have pg et al, and while YC is applying mass-production techniques to startups, by the standards of markets where APIs exist to conduct transactions they're still in the early industrial revolution. If pg was just a decision engine for Startup#fund(amount), a vaguely specified API which could put hundreds of millions of dollars to work on any given day and which didn't require artisanal mentorship and connection-making of the fledgling startups, you would expect somebody from Wall Street to already have said "We can offer you an arbitrarily high amount of money to do that for us."
swah 13y ago
In the tradition of Dijkstra...
auggierose 13y ago
What I am wondering about is: would Einstein be a good start-up founder?
- mbyrne 13y ago
  History says no. He was never able to build a great business with the fashionable blouses he designed. He never was able to scale his refrigerator company beyond the customer discovery phase and sold the patent to Electrolux... Google these if you think I am joking.
  - auggierose 13y ago
    I found the patents for the blouses / refrigerators, but it seems to me that this was more of a hobby of his, not a serious startup endeavour. My imaginary scenario is more like this: let's assume that there is something like the relativity theory of programming, i.e. in order to build programs of a certain size and complexity you HAVE to use the relativity theory, otherwise you'll fail. Now, could Einstein have built a software company that takes advantage of this?
sitkack 13y ago
It is amazing how much value and change in the world has occurred because of ycombinator companies, direct and follow on effects. And all of this for the paltry sum of 1.7 billion (ish) dollars. The 1,467 Billion we've spent on the war(s) so far could have made ~850 ish entire ycombinators, on the order of 450k startups. As well as exhausting the entire io and ly domain name spaces.
- pkfrank 13y ago
  It's important to note that YC skims from the top, taking the creme de la creme. Applying 1000x the money would not yield 1000x the return, as there's a finite number of the "good founders" PG notes.
- 2arrs2ells 13y ago
  The limiting factor on YC is not cash.
  - sitkack 13y ago
    With the kind of money I present, one can farm and not just spear fish.
graeme 13y ago
Something interesting: a lot of people thought Airbnb was terrible, including YC and Fred Wilson. I was 23 when Airbnb was founded. I had had many happy experiences with Couchsurfing. For me, and many Couchsurfers, the idea of an upscale, paid couchsurfing was trivially obvious. None of us built it, but I assumed someone would. I'm not sure what the lesson is.
- twog 13y ago
  The lesson learned is to build things you love but others don't yet understand. Thats the key to emerging markets
  - graeme 13y ago
    I guess what I found interesting is that this was something MILLIONS loved and yet it was a very specific demographic so the wider world missed the potential. Heck, most people, if you pitch them on Airbnb today, will say: "That would never work". Half the people I know outside the tech niche haven't heard of it. So something can be quite large, well proven, yet seem like a lousy idea if you have a set of blinders on.
jgalt212 13y ago
Is anyone else digging the Tevas with long sleeves look being sported by PG?
6thSigma 13y ago
Has there ever been a bubble in low liquidity assets like startup equity? I would think high liquidity is a huge piece of a bubble.
tduquette1 13y ago
I hope that Paul doesn't consider a Boston accent to be "a strong foreign accent."
- snoonan 13y ago
  I do! I was born and raised here. I dropped it in high school and am happy I did. America doesn't tolerate regional accent diversity like they did in the past. People listen more if you speak Generican.
ballard 13y ago
I cackled to myself 4.6x. Honesty is the sniper of the mind. Thanks 'pg.
checker659 13y ago
So, one of the purposes of the application video is to judge a person's accent? Is that fair?
- snoonan 13y ago
  What would fairness have to do with the success of a startup? Put two founders on stage at a conference and the audience won't be fair either. Extend that to other events, web video, TV appearances and other audio/video media. He's not in a position to change other people's prejudice with his investments.
  - checker659 13y ago
    By "Is that fair", I meant: Is that fair to say? As in, is that what it means (?).
infoseckid 13y ago
Funny --- next time when YC rejects a company with foreign founders, you should ask them "Was it the idea or the accent?" :D Hilarious ...
photorized 13y ago
Everybody got excited about the foreign accent thing, but my favorite quote was actually "it's easier to be an investor than it is to start a company". So very true. I just launched an incubator, and I've been telling VCs to drop the attitude.

250 points by shakes 13y ago

pg 13y ago

That's a very Kate Courteau picture incidentally. She's our architect, and is the reason YC looks so distinctive. It's hard to get simple right, but she does.

thetrumanshow 13y ago
I would love to have a high-res version of that. If you're in a Q/A mood, I'm curious: When you start to see one of the YC batch companies struggling... what does an intervention look like?
brianjesse 13y ago
I love the way she used a super wide shot to pull in so many graphic elements - beautifully done, Kate Courteau.
- brianjesse 13y ago
  oh I see now that she didn't take the actual picture but Jason Madara did that -
  - brudgers 13y ago
    Like food styling, architectural photography is a discipline unto itself.
hnriot 13y ago
I don't see anything very distinctive. Aside from the usual colorful doors == sf startup, the place (from that photograph) looks just like any other startup space (except darker, but that's likely because it would have made taking that photo difficult if the background were bright)

larrys 13y ago

" If a place has really good food, it can be in an obscure location, charge a lot, and have really bad service, and it will still be popular. If it has bad food, boy, it better do something really special to get anybody in there." The "special" can be "location". Food on the NJ Turnpike (or similar) is an example of a captive market where quality of food is not the key ingredient but landing the contract and being merely acceptable can still be very profitable. Likewise being in Times Square, if you can afford the rent, can be profitable because you are not worried about repeat business but simply grabbing the tourists that will only be a customer one time.

LogicX 13y ago
I see the times square trend in Myrtle Beach, in a slightly different way: poorly run (which includes bad food) restaurants can be open only seasonal, get sufficient 'incidental' business to survive and then shut down during the off season due to low property costs. I suspect eventually property valuations will make it too attractive to sell out to more profitable business, whether thats due to being better run or all-year.
rustynails77 13y ago
Just to be clear, this rule doesn't work for McDonalds - as it's an established brand. Their food is awful, but the place tends to be clean and tidy - with a toilet. Interestingly, where I live, Burger Kings tend to be filthy and poorly maintained, with slightly better tasting food. They are also popular - so cleanliness doesn't seem to be a major contributor.
- jonnathanson 13y ago
  McDonalds' food is awful by what standard, precisely? From a health standpoint, sure. From the standpoint of a foodie, yes. From the standpoint of pretty much anyone who is accustomed to nicer food, in nicer circumstances, sure. But McDonalds isn't competing on the dimension of "quality" as other restaurants might define that term. McDonalds is competing on scale and consistency. A Big Mac [1] in Jakarta tastes identical to a Big Mac in Cleveland. A pack of fries in Moscow tastes identical to a pack of fries in Istanbul. If you walk into a McDonalds in any part of the world, barring a few local specialties on the menu, you know exactly what you're going to get, and exactly when you're going to get it. That's pretty damned remarkable. McDonalds runs a marketing and logistics company, not a restaurant chain. [1] Insert Pulp Fiction reference here.

larrys 13y ago

"He is brilliant and hilariously funny." How is being hilariously funny an advantage in terms of working for YC?

asolove 13y ago
Presumably being likable is important when you're trying to make business deals. Plus, if you are doing well and earning more money that is necessary, you can probably afford to optimize for other things, like enjoying the people you work with.
pg 13y ago
That's actually a very interesting question. I've noticed for a while that the people who are best at giving advice to startups tend to be funny. It's not a job where it would be good to be the humorless variety of smart. I think the reason is not that being funny is important per se, but that being funny and having good ideas about startups are so similar that it's impossible to find one without the other.
- deleted 13y ago
  [deleted]
- larrys 13y ago
  Would add that humor to me is linked to being liked which is important in getting people to do what you want them to do or listen to you.. And being liked is related to at least two things [1]. One is having lots of people who want to be around you which can be an advantage (you can get people to help you and do things for you it's like being the "pretty" girl). Of course it can also be a big distraction (you are funny and people want to spend time with you so you are less inclined to stay in side and study or hack at something). In terms of someone listening to you humor is like an anesthetic that puts people at ease and makes them more inclined to at least hear you out (that is if they don't take you as being a complete goofball). And perhaps the mental state that a good joke puts them in makes it less likely that they will be defensive and opens them up. (An example is my wife who I can never get mad at because she is always following up with humor to anything that goes wrong.) I could also stretch and add that being funny provides social proof since the group as a whole likes or appears to like the funny person giving advice. [1] Strictly my observations over time.

pcunite 13y ago

With hands in pocket he has not been captured mid motion. He is therefore purposefully guarding entrance into the "Y". The blue exit door is for anyone who cannot answer his questions three.

gfodor 13y ago
"What have you made?" "Who wants it?" "How do you know?"

mathattack 13y ago

"We were the kind of start-up started by nerds who were really good at programing and really, really bad at sales and business. Now I would know exactly what to tell my previous self, which is that I should be spending all my time selling." Is this a case of playing to your personal weakness, or is it playing to your personal blind spot? In either case, how long until you say, "This is important, but I'm not good at it. I have to bring someone in to do it while teaching me." My impression is a good salesperson quickly pays for themselves.

akbar501 13y ago
In my experience, a good salesperson is either a total drag or big boost. The total drag happens when a salesperson is brought on too soon. When the product is not aligned with the market (pre-product/market fit), there is little a good salesperson can do. In this situation, everyone gets frustrated as success does not happen and costs increase. Post-product/market fit, a good salesperson can certainly accelerate growth. The use of the word "accelerate" here is deliberate as the founder(s) should be the ones to spark growth. Initial sales should always be made by the founders for several reasons: 1. Your initial idea is likely misaligned with the market. The only way to figure this out is to be listen directly to customer's rejections and stall tactics. 2. Customer's will initially be positive (before you ask for money or ask them to do something), and watching this change from positive/supportive to neutral/negative forces a good reality check. 3. The founder(s) bring the most excitement to the sales process. You need to be the spark for interest/excitement about the solution. Salespeople will then feed off of your excitement.
- mathattack 13y ago
  Fair enough - you don't need them too soon. But in this instance, the starting point is the founder deciding (in hindsight) that spending all of their time in Sales would be good.

ngoel36 13y ago

"One quality that's a really bad indication is a CEO with a strong foreign accent...they must just be clueless if they haven't gotten rid of their strong accent." I'm curious to learn more about this. I'm certainly not accusing YC/PG of being racist in the least, but although I don't have an accent, I feel like I know numerously brilliantly smart people with heavy accents, many of whom happen to be Indian-born Stanford students or Google employees. I think we all know that "brilliantly smart" doesn't necessarily correlate with "great CEO", but it has to suck that something like your own accent puts you at a huge disadvantage applying to YC.

infoseckid 13y ago
Me too! I would have thought there could be so many things in the number 1 spot ... and then this :)
- davidw 13y ago
  Err... if you read the article, he says "one quality", not "the number one". Also, it's worth considering that this is something that has jumped at them only after a number of batches of YC, not something that they started out with, so it is, in some way, based on actual data. They probably already filter out people based on any number of more important criteria.
  - infoseckid 13y ago
    If found it worth a mention for a worldwide released article ... I am sure its pretty high on his list
soneca 13y ago
I think the difficulties of communication, specially during incubation time and demo day, justify this qualifying as a bad indication. A great deal of YC value lies in the office hours and everyone has some bias to listen what they want to listen on a feedback session and to create excuses as "they didn't quite get my idea, that is why they are pointing these errors". When mentors actually don't understand them and vice-versa, this may totally nullify a feedback session. Networking on Demo Day (and subsequently fundraising meetings) also is seriously jeopardized. How to look formidable when you can't even sound "right". But on the other hand, this shows a way of doing business that SV still suffers from: they are too west centered. These companies build things to US market and, sometimes, Europe. South America usually follow-up as we (i am brazilian) are very connected to US culture. But even we have our thriving copycat companies. But if you take Russia and China into account, then they often have juggernauts versions of SV companies (not regular copycats, but dominant companies) that the original ones just can't easily beat when they try. I don't think there is causality here, just guessing that they are both reflects of a particular trace of SV companies: US is the Total Adressable Market. So, if you don't completely fit with the US culture, you will likely fail as a startup CEO in SV (for pragmatic reasons, not any "racist" bias or anything like that). At the same time, these companies usually take a little too long time to expand internationally. This a diferentiation that 500startups have that, in my opinion, will pay large benefits to them eventually.

davidw 13y ago

> There is a secular trend going on, in which launching a start-up is a more common thing to do. It used to be there were two things you could do after college: go to grad school or get a job. Soon, I think there will be three things: go to grad school, get a job, or start your own company. I suspect this will be one of these economic transformations on the scale of the industrial revolution. That's a very interesting topic, and is something I wonder about too. Historically speaking, the amount of capital required to start an internet company these days is amazingly low. Will this last? Maybe in the future, to even get started, people will need more horsepower in terms of servers, or storage, or something like that, and this low-capital period will be seen as an anomaly. Or maybe the trend will continue and spread to other fields. Are there others that are ripe for a similar transformation, where it gets super easy to start something new? Also, I like this quote/thinking: > The way you'll get big ideas in, say, health care is by starting out with small ideas. If you try to do some big thing, you don't just need it to be big; you need it to be good. And it's really hard to do big and good simultaneously. So, what that means is you can either do something small and good and then gradually make it bigger, or do something big and bad and gradually make it better. And you know what? Empirically, starting big just does not work.

sunir 13y ago

I'm really disappointed that this was Paul's top of mind criterion for rejection, "One quality that's a really bad indication is a CEO with a strong foreign accent." That reminds me of an incident earlier in my career when a recruiter ranked candidates on their 'communication skills', which really was a proxy for whether they were an immigrant or not, in order to try to avoid discrimination laws. http://www.freshbooks.com/blog/2007/07/23/immigrant-quebecois-newfoundlanders-not-wanted/ http://www.freshbooks.com/blog/2007/07/23/immigrant-quebecoi... Besides, it's failing to communicate clearly and be understood that makes a bad leader, regardless of the behavioural cause (foreign accent, mumbling, random trains of thought).

auganov 13y ago
Having a strong accent can make it much harder to communicate. I don't know if statistically true, but from my experience most of people with bad accents tend to use the language less effectively too. If you're in tech you probably use English everyday if not all the time. With that amount of immersion it's just kind of hard not to be at least mediocre. Also there's this immense sense of quality about people that speak a foreign language super well. I think pg meant strong foreign accent combined with usage that just doesn't feel native. Which I feel is strongly correlated.
pg 13y ago
It's not our top criterion. It's just one that I'm willing to talk about publicly, because there's no way to fake it. We're not against funding people from outside the US, and we fund a lot of them. But 564 startups is enough to see patterns, and the empirical evidence about very strong accents is striking. And I am talking about failure to communicate here. I don't mean strong accents in the sense that it's clear that someone comes from another country. I'm talking about accents so strong that you have to interrupt the conversation to ask what they just said.
- c0mpute 13y ago
  According to this article, 14% of the top 500 CEOs are non-native to the company's homeland. http://money.cnn.com/gallery/leadership/2013/07/08/global-500-non-native-ceos.fortune/index.html http://money.cnn.com/gallery/leadership/2013/07/08/global-50... Even empirically your dataset consists of startups that target USA markets mostly and hence this conclusion. I am guessing CEOs are good and can come from anywhere, its perhaps "sales" that really needs the idiomatic speak.

bfe 13y ago

"Nobody knows what they're capable of until they try it. Maybe half a percent of people have the brains and sheer determination to do this kind of thing. Start-ups are hard but doable, in the way that running a five-minute mile is hard but doable." Worth remembering.

unono 13y ago

Does anyone know what has been PG's ROI on his investments is, for all we know it could be below industry standard. Also, by PG's own words he only invests in the relentlessly resourceful. What do they need PG and later round VC's for? I always get the feeling with PG that something hidden is at play, he's a really really clever guy. There's a sucker getting played when he's around. (For example, Zuckerburg is not as smart as PG keeps enthusing, there's a lot smarter guys than him, so I think he's got some sell YC companies to Facebook flow going on. Another, Andrew Mason is just a terrible business guy - why is PG linking with him - probably experience at knowing how to keep investors from realizing what's actually happening).

arbuge 13y ago
>> Does anyone know what has been PG's ROI on his investments is, for all we know it could be below industry standard. Hell no. Just do the math: http://ycombinator.com/nums.html http://ycombinator.com/nums.html The total value of YC companies is more like $12B today. That makes their average 6% stake worth around $700m or so. Around 600 companies total, at around $20k each - a total investment of just $12m or so by my calculations. $12m to $700m in <10 years is about as good as it gets in investing.
- unono 13y ago
  If that's true, then that's astounding. Why isn't some huge wall street fund swooping in to this? Do people not know. The White House should be calling in PG for advice.
  - patio11 13y ago
    That's a good question. The main reason is that the hypothetical Huge Wall Street Firm doesn't see a way to reproduce the project at scale. They don't have pg et al, and while YC is applying mass-production techniques to startups, by the standards of markets where APIs exist to conduct transactions they're still in the early industrial revolution. If pg was just a decision engine for Startup#fund(amount), a vaguely specified API which could put hundreds of millions of dollars to work on any given day and which didn't require artisanal mentorship and connection-making of the fledgling startups, you would expect somebody from Wall Street to already have said "We can offer you an arbitrarily high amount of money to do that for us."

swah 13y ago

In the tradition of Dijkstra...

auggierose 13y ago

What I am wondering about is: would Einstein be a good start-up founder?

mbyrne 13y ago
History says no. He was never able to build a great business with the fashionable blouses he designed. He never was able to scale his refrigerator company beyond the customer discovery phase and sold the patent to Electrolux... Google these if you think I am joking.
- auggierose 13y ago
  I found the patents for the blouses / refrigerators, but it seems to me that this was more of a hobby of his, not a serious startup endeavour. My imaginary scenario is more like this: let's assume that there is something like the relativity theory of programming, i.e. in order to build programs of a certain size and complexity you HAVE to use the relativity theory, otherwise you'll fail. Now, could Einstein have built a software company that takes advantage of this?

sitkack 13y ago

It is amazing how much value and change in the world has occurred because of ycombinator companies, direct and follow on effects. And all of this for the paltry sum of 1.7 billion (ish) dollars. The 1,467 Billion we've spent on the war(s) so far could have made ~850 ish entire ycombinators, on the order of 450k startups. As well as exhausting the entire io and ly domain name spaces.

pkfrank 13y ago
It's important to note that YC skims from the top, taking the creme de la creme. Applying 1000x the money would not yield 1000x the return, as there's a finite number of the "good founders" PG notes.
2arrs2ells 13y ago
The limiting factor on YC is not cash.
- sitkack 13y ago
  With the kind of money I present, one can farm and not just spear fish.

graeme 13y ago

Something interesting: a lot of people thought Airbnb was terrible, including YC and Fred Wilson. I was 23 when Airbnb was founded. I had had many happy experiences with Couchsurfing. For me, and many Couchsurfers, the idea of an upscale, paid couchsurfing was trivially obvious. None of us built it, but I assumed someone would. I'm not sure what the lesson is.

twog 13y ago
The lesson learned is to build things you love but others don't yet understand. Thats the key to emerging markets
- graeme 13y ago
  I guess what I found interesting is that this was something MILLIONS loved and yet it was a very specific demographic so the wider world missed the potential. Heck, most people, if you pitch them on Airbnb today, will say: "That would never work". Half the people I know outside the tech niche haven't heard of it. So something can be quite large, well proven, yet seem like a lousy idea if you have a set of blinders on.

jgalt212 13y ago

Is anyone else digging the Tevas with long sleeves look being sported by PG?

6thSigma 13y ago

Has there ever been a bubble in low liquidity assets like startup equity? I would think high liquidity is a huge piece of a bubble.

tduquette1 13y ago

I hope that Paul doesn't consider a Boston accent to be "a strong foreign accent."

snoonan 13y ago
I do! I was born and raised here. I dropped it in high school and am happy I did. America doesn't tolerate regional accent diversity like they did in the past. People listen more if you speak Generican.

ballard 13y ago

I cackled to myself 4.6x. Honesty is the sniper of the mind. Thanks 'pg.

checker659 13y ago

So, one of the purposes of the application video is to judge a person's accent? Is that fair?

snoonan 13y ago
What would fairness have to do with the success of a startup? Put two founders on stage at a conference and the audience won't be fair either. Extend that to other events, web video, TV appearances and other audio/video media. He's not in a position to change other people's prejudice with his investments.
- checker659 13y ago
  By "Is that fair", I meant: Is that fair to say? As in, is that what it means (?).

infoseckid 13y ago

Funny --- next time when YC rejects a company with foreign founders, you should ask them "Was it the idea or the accent?" :D Hilarious ...

photorized 13y ago

Everybody got excited about the foreign accent thing, but my favorite quote was actually "it's easier to be an investor than it is to start a company". So very true. I just launched an incubator, and I've been telling VCs to drop the attitude.