3 ms·

Though it's still a bit early to say, it looks like the probability of a YC startup ending up worth a billion dollars is at least .5%. So the truth is somewher

by pg 13y ago

Though it's still a bit early to say, it looks like the probability of a YC startup ending up worth a billion dollars is at least .5%. So the truth is somewhere on the continuum between (a) that you're off by a factor of 5000, and (b) that we improve people's chances by 5000x. And while it would be a great compliment if people chose extremum (b), I think it would be a stretch to claim we can improve the probability by even 10x.

mrsharpoblunto 13y ago
If one factors in the 2-3% YC acceptance rate, and makes the assumption (that I admittedly haven't checked out) that no startups rejected by YC are now billion dollar companies, that closes the difference down to around 100x
- loceng 13y ago
  If there are limited choices for resources and YC gets to choose the best options, then how much is actually attributed to being in YC vs. those startups having received mentorship? Out of the companies that will become or are billion dollar companies, how many already had their direction/focus and business model decided before joining YC? Correlation != causation, right?
tel 13y ago
From another perspective, likelihoods like these depend on information. Every iota of market validation that is compatible with a $1B company improves the likelihood that you will create one.
beambot 13y ago
You've just added information that will alter the probability. The prior can still be 0.00006% and the addition of new evidence (in the bayesian sense) of being admitted into YC could result in a posterior probability of 0.5%. (Sorta like using Series A as a filter.)
- baddox 13y ago
  Yes, this is extremely simple, and I'm surprised to see intelligent people apparently confused over it. The percentage in the article is obviously referring to all companies, and more information will obviously alter the percentage. Are people genuinely confused by this, or are they just trying to discredit the article by feigning confusion?
- _dps 13y ago
  This only adds (Bayesian) evidence to an abstract frame of knowledge that doesn't matter to anyone in real decision making processes: a frame in which the observer uniformly samples all startups. People who actually care about these odds (in the sense of betting on them) are founders and investors. Neither, in their decision making process, gets to (or wants to!) uniformly sample all companies. PG's numbers are thus much more useful to anyone actually trying to make a decision about a pool of investments: assuming the distribution of YC startups is fixed over time, and you are someone like Start Fund who will bet on the pool (i.e. equivalent to a repeated uniform sampling in expected value), the 0.5% is actionable information and the 0.00006% is not.
  - beambot 13y ago
    I don't disagree with you re:investors (or pg's numbers) who seek to obtain as much evidence as possible so as to maximize their ROI. But priors do matter. For example, if the prior on "making a successful company" (defined however you want) were a vastly higher 40%, then I'd imagine a lot more laypeople would take the plunge. Reading sites like TechCrunch makes it seem to the layperson that building a successful company is much easier than it really is. So yes, knowing that "mega success" is a massive outlier (to the tune of 1:1,000,000) is indeed actionable information to a layperson thinking about starting a company without any additional evidence. As the source article notes: The goal of the entrepreneur is to learn as much as they can, thereby increasing their own odds of success (or minimizing their odds of failure). Obviously, getting into YC massively improves your odds and would probably be a good decision! As a YC alum, my advise would jive with this observation. ;)

by pg 13y ago

mrsharpoblunto 13y ago

If one factors in the 2-3% YC acceptance rate, and makes the assumption (that I admittedly haven't checked out) that no startups rejected by YC are now billion dollar companies, that closes the difference down to around 100x

loceng 13y ago
If there are limited choices for resources and YC gets to choose the best options, then how much is actually attributed to being in YC vs. those startups having received mentorship? Out of the companies that will become or are billion dollar companies, how many already had their direction/focus and business model decided before joining YC? Correlation != causation, right?

tel 13y ago

From another perspective, likelihoods like these depend on information. Every iota of market validation that is compatible with a $1B company improves the likelihood that you will create one.

beambot 13y ago

You've just added information that will alter the probability. The prior can still be 0.00006% and the addition of new evidence (in the bayesian sense) of being admitted into YC could result in a posterior probability of 0.5%. (Sorta like using Series A as a filter.)

baddox 13y ago
Yes, this is extremely simple, and I'm surprised to see intelligent people apparently confused over it. The percentage in the article is obviously referring to all companies, and more information will obviously alter the percentage. Are people genuinely confused by this, or are they just trying to discredit the article by feigning confusion?
_dps 13y ago
This only adds (Bayesian) evidence to an abstract frame of knowledge that doesn't matter to anyone in real decision making processes: a frame in which the observer uniformly samples all startups. People who actually care about these odds (in the sense of betting on them) are founders and investors. Neither, in their decision making process, gets to (or wants to!) uniformly sample all companies. PG's numbers are thus much more useful to anyone actually trying to make a decision about a pool of investments: assuming the distribution of YC startups is fixed over time, and you are someone like Start Fund who will bet on the pool (i.e. equivalent to a repeated uniform sampling in expected value), the 0.5% is actionable information and the 0.00006% is not.
- beambot 13y ago
  I don't disagree with you re:investors (or pg's numbers) who seek to obtain as much evidence as possible so as to maximize their ROI. But priors do matter. For example, if the prior on "making a successful company" (defined however you want) were a vastly higher 40%, then I'd imagine a lot more laypeople would take the plunge. Reading sites like TechCrunch makes it seem to the layperson that building a successful company is much easier than it really is. So yes, knowing that "mega success" is a massive outlier (to the tune of 1:1,000,000) is indeed actionable information to a layperson thinking about starting a company without any additional evidence. As the source article notes: The goal of the entrepreneur is to learn as much as they can, thereby increasing their own odds of success (or minimizing their odds of failure). Obviously, getting into YC massively improves your odds and would probably be a good decision! As a YC alum, my advise would jive with this observation. ;)