4 ms·

I feel like this is a big shift in focus for YC and for the industry if others follow suit. This will do a lot of good in changing the image of the typical star

by kyro 13y ago

I feel like this is a big shift in focus for YC and for the industry if others follow suit. This will do a lot of good in changing the image of the typical startup, from who starts them to what their ambitions are, signaling to those in other industries that the valley isn't just about young code-slingers and iOS apps. I hope this encourages people in STEM with years of specialized domain experience to look at starting a company as a seriously viable option.

nawitus 13y ago
It's a huge shift in terms of funding levels. Instead of getting $100k to build a focused software startup focusing essentially on a single "simple" problem, you usually need around $10-$100 million to get started on these big problems. On the other hand, one can start with $100k which is mainly used to secure the rest of the funding. This new "shift" is essentially what the Founders Fund is trying to do.
rayiner 13y ago
Someone needs to show that you can actually make money with something like this. The problem with these sorts of ventures is that besides being capital-intensive and risky, it can be quite hard to capture the economic benefits of the development in a way that justifies the investment. There's also the issue of whether Silicon Valley has the requisite infrastructure to facilitate these sorts of projects. If you want to do projects in robotics, DARPA has both money to give you, deep connections with the universities developing the basic science, and a program manager to manage the project that typically has a PhD in the field. There's a lot of downsides to DARPA, namely that everything has to have some sort of military angle, but there's a wealth of technical expertise sloshing around there.
- toomuchtodo 13y ago
  > If you want to do projects in robotics, DARPA has both money to give you, deep connections with the universities developing the basic science, and a program manager to manage the project that typically has a PhD in the field. The last head of DARPA now heads up Google X. SFBA has tens, if not hundreds, of billions of dollars available to it. Capability isn't the question. Its the will that matters. As an investor, are you willing to sacrifice returns for the equivalent of the laser or the transistor?
  - rayiner 13y ago
    Well first, I think Google starting engineer salaries are closing in pretty quickly on what the head of DARPA makes, so there's that aspect of things. Second, SFBA does have a lot of money, but it's expertise is in investing that money into consumer products. It does not have an established track-record of doing fundamental R&D, and VC's don't have the kind of technical expertise (in the relevant areas) a place like DARPA does. Now could they acquire that capability? Sure, with time and money you can buy whatever you want. But will comes into play there--why invest in that capability when you can get quicker returns in consumer products? I do agree, though, that a big corporate R&D lab like at Google is better-positioned to tackle these sorts of projects than VC-funded start ups.
  - aaronblohowiak 13y ago
    Speaking of the profitability of the invention of the laser, you might enjoy reading: http://en.wikipedia.org/wiki/Gordon_Gould http://en.wikipedia.org/wiki/Gordon_Gould
    - toomuchtodo 13y ago
      I specifically used the laser as an example due to Mr. Gould's experience. :)
- larrys 13y ago
  "Someone needs to show that you can actually make money with something like this." And interestingly it also seems to go against Mark Cubans SV hypothesis as well. https://news.ycombinator.com/item?id=7430152 https://news.ycombinator.com/item?id=7430152
- supersystem 13y ago
  The only thing that really matters for YC is if the company can be acquired. With Google just buying a bunch of robotics companies and the belief in "geek exceptionalism" as high as ever I've seen worse bets.
  - rayiner 13y ago
    Okay, can they get Boeing to acquire one of those companies? Because those are the kinds of relevant players in most of these areas.
    - deleted 13y ago
      [deleted]
    - loganu 13y ago
      Why not? Advances in materials, energy, batteries, would be right up Boeing's alley. Diagnostics, communications for planes? What if YC funded a company that had a novel method to make petroleum extraction 20% faster, cleaner or more efficient? Or could help scale lotus-effect paints to mass production? Or could bring big data/ machine-learning to health care to crunch through our habits and health history to find strange correlations and insights that we wouldn't think of? YC now (publicly) looks like it's working on the ideas and types of companies that the world needs more of. If this shift is real, it opens up YC to smart people without CS degrees. (I know it was before, but it's perception as well) And there are exits, they're just outside of SV. GE, Philips, Exxon, GSK, Pfizer, Bombardier...
      - rayiner 13y ago
        The value of YC is the connections, expertise, and support it provides. In terms of these things, what does it bring to the table in oil extraction or aerospace? You're not showing how to get from point A to point B.
- _delirium 13y ago
  > it can be quite hard to capture the economic benefits of the development This is a key issue, I think. When doing something technically innovative, a very common pattern is that the team that spends all the money & time up front to get the first working version is not the one that ends up with the successful market leadership: once the up-front investment is sunk, a 2nd team can much more cheaply iterate on the market/business side of things and capture the market without spending money on the R&D. Sometimes it might even be a different market, since inventions researched for one purpose may turn out to be applicable in another field. Patents are an attempt to provide a mechanism to reimburse the first group in that scenario, but are pretty imperfect. One reason I prefer to see research publicly funded is that I think it's often good that it's difficult to capture/monetize the benefits benefits of research breakthroughs. I'd rather not have researchers spending their time trying to figure out how to encumber/"own" the results of their research out of a need to get their investors an ROI.
mattgreenrocks 13y ago
This would reinvigorate some of us who are jaded by SV's astounding lack of ambition towards actually solving hard problems as well. I didn't become an engineer to crank out CRUD apps in some rock star's crazy DSL all day.
- supersystem 13y ago
  With YC companies not solving hard problems in computing I don't see them suddenly solving hard problems in other fields. And with "hard problems" I don't (only) mean CS, I mean problems with the state of computing like security, robustness, cross-platforms tools etc. that could be huge enablers for other fields.
- foobarqux 13y ago
  A VC's job is to take in money and return even more money. Not to be ambitious. Pension funds don't care about creating innovation.
  - hiddentao 13y ago
    Spot on. A VC will fund something really risky and innovative if and only if they think they'll likewise make a larger profit from it compared less risky ventures. But as pointed out by other commenters even this risk-taking is limited. Ventures like SpaceX and Tesla that have a long lead time and (at least in these two cases) are loss-making at the start probably wouldn't get YC-VC funding. Or at least they wouldn't get anywhere near the level of funding they'd need to get to profitability point. I wager that for some of the really big world-changing projects we simply have to be willing to fund it as long as necessary, taking an extremely long-term view. And for this, VC funding is probably not going to be enough. Both Tesla and SpaceX needed to take in public (read: Government) funding to keep going.

by kyro 13y ago

nawitus 13y ago

It's a huge shift in terms of funding levels. Instead of getting $100k to build a focused software startup focusing essentially on a single "simple" problem, you usually need around $10-$100 million to get started on these big problems. On the other hand, one can start with $100k which is mainly used to secure the rest of the funding. This new "shift" is essentially what the Founders Fund is trying to do.

rayiner 13y ago

Someone needs to show that you can actually make money with something like this. The problem with these sorts of ventures is that besides being capital-intensive and risky, it can be quite hard to capture the economic benefits of the development in a way that justifies the investment. There's also the issue of whether Silicon Valley has the requisite infrastructure to facilitate these sorts of projects. If you want to do projects in robotics, DARPA has both money to give you, deep connections with the universities developing the basic science, and a program manager to manage the project that typically has a PhD in the field. There's a lot of downsides to DARPA, namely that everything has to have some sort of military angle, but there's a wealth of technical expertise sloshing around there.

toomuchtodo 13y ago
> If you want to do projects in robotics, DARPA has both money to give you, deep connections with the universities developing the basic science, and a program manager to manage the project that typically has a PhD in the field. The last head of DARPA now heads up Google X. SFBA has tens, if not hundreds, of billions of dollars available to it. Capability isn't the question. Its the will that matters. As an investor, are you willing to sacrifice returns for the equivalent of the laser or the transistor?
- rayiner 13y ago
  Well first, I think Google starting engineer salaries are closing in pretty quickly on what the head of DARPA makes, so there's that aspect of things. Second, SFBA does have a lot of money, but it's expertise is in investing that money into consumer products. It does not have an established track-record of doing fundamental R&D, and VC's don't have the kind of technical expertise (in the relevant areas) a place like DARPA does. Now could they acquire that capability? Sure, with time and money you can buy whatever you want. But will comes into play there--why invest in that capability when you can get quicker returns in consumer products? I do agree, though, that a big corporate R&D lab like at Google is better-positioned to tackle these sorts of projects than VC-funded start ups.
- aaronblohowiak 13y ago
  Speaking of the profitability of the invention of the laser, you might enjoy reading: http://en.wikipedia.org/wiki/Gordon_Gould http://en.wikipedia.org/wiki/Gordon_Gould
  - toomuchtodo 13y ago
    I specifically used the laser as an example due to Mr. Gould's experience. :)
larrys 13y ago
"Someone needs to show that you can actually make money with something like this." And interestingly it also seems to go against Mark Cubans SV hypothesis as well. https://news.ycombinator.com/item?id=7430152 https://news.ycombinator.com/item?id=7430152
supersystem 13y ago
The only thing that really matters for YC is if the company can be acquired. With Google just buying a bunch of robotics companies and the belief in "geek exceptionalism" as high as ever I've seen worse bets.
- rayiner 13y ago
  Okay, can they get Boeing to acquire one of those companies? Because those are the kinds of relevant players in most of these areas.
  - deleted 13y ago
    [deleted]
  - loganu 13y ago
    Why not? Advances in materials, energy, batteries, would be right up Boeing's alley. Diagnostics, communications for planes? What if YC funded a company that had a novel method to make petroleum extraction 20% faster, cleaner or more efficient? Or could help scale lotus-effect paints to mass production? Or could bring big data/ machine-learning to health care to crunch through our habits and health history to find strange correlations and insights that we wouldn't think of? YC now (publicly) looks like it's working on the ideas and types of companies that the world needs more of. If this shift is real, it opens up YC to smart people without CS degrees. (I know it was before, but it's perception as well) And there are exits, they're just outside of SV. GE, Philips, Exxon, GSK, Pfizer, Bombardier...
    - rayiner 13y ago
      The value of YC is the connections, expertise, and support it provides. In terms of these things, what does it bring to the table in oil extraction or aerospace? You're not showing how to get from point A to point B.
_delirium 13y ago
> it can be quite hard to capture the economic benefits of the development This is a key issue, I think. When doing something technically innovative, a very common pattern is that the team that spends all the money & time up front to get the first working version is not the one that ends up with the successful market leadership: once the up-front investment is sunk, a 2nd team can much more cheaply iterate on the market/business side of things and capture the market without spending money on the R&D. Sometimes it might even be a different market, since inventions researched for one purpose may turn out to be applicable in another field. Patents are an attempt to provide a mechanism to reimburse the first group in that scenario, but are pretty imperfect. One reason I prefer to see research publicly funded is that I think it's often good that it's difficult to capture/monetize the benefits benefits of research breakthroughs. I'd rather not have researchers spending their time trying to figure out how to encumber/"own" the results of their research out of a need to get their investors an ROI.

mattgreenrocks 13y ago

This would reinvigorate some of us who are jaded by SV's astounding lack of ambition towards actually solving hard problems as well. I didn't become an engineer to crank out CRUD apps in some rock star's crazy DSL all day.

supersystem 13y ago
With YC companies not solving hard problems in computing I don't see them suddenly solving hard problems in other fields. And with "hard problems" I don't (only) mean CS, I mean problems with the state of computing like security, robustness, cross-platforms tools etc. that could be huge enablers for other fields.
foobarqux 13y ago
A VC's job is to take in money and return even more money. Not to be ambitious. Pension funds don't care about creating innovation.
- hiddentao 13y ago
  Spot on. A VC will fund something really risky and innovative if and only if they think they'll likewise make a larger profit from it compared less risky ventures. But as pointed out by other commenters even this risk-taking is limited. Ventures like SpaceX and Tesla that have a long lead time and (at least in these two cases) are loss-making at the start probably wouldn't get YC-VC funding. Or at least they wouldn't get anywhere near the level of funding they'd need to get to profitability point. I wager that for some of the really big world-changing projects we simply have to be willing to fund it as long as necessary, taking an extremely long-term view. And for this, VC funding is probably not going to be enough. Both Tesla and SpaceX needed to take in public (read: Government) funding to keep going.