5 ms·

to be clear: i don't think seed investing is random. far from it. i just think it's really important to think independently and take the time to really get to

by sama 12y ago

to be clear: i don't think seed investing is random. far from it. i just think it's really important to think independently and take the time to really get to know founders and understand businesses instead of just following other investors.

deleted 12y ago
[deleted]
holoplus 12y ago
This is intuitive - Startups that follow all fail - Investing in startups should be the same Curious if there are patterns in why the hot ones Fail ?
- S4M 12y ago
  Don't forget that any startup has by definition a low probability of success - maybe the best ones have something like 20% (a ballpark) - so I don't think there's a definite pattern to predict successful startups.
edanm 12y ago
Curious thought- you mention the (unsurprising) thought that people who are good at fundraising aren't necessarily good at running a company. But, all other things being equal, I'd expect someone who's good at "winning" at the game called "raising money" to be the type of person who is better at winning at other games, e.g. running a good company. In other words, while being good at raising money doesn't necessarily mean they're good at running a company, I'd still take them over the "average person". You seem to imply the opposite in your post - is that really right? Maybe people who are good at fundraising have spent too much time/energy on that vs. getting good at building a company? That sounds specious to me.
- nostrademons 12y ago
  If the skillsets needed to found a company are largely independent and time spent learning them is a limiting factor - both of which are true in my startup experience - then time spent learning the fundraising skillset cuts into time spent learning customer development, or the particulars of your market, or engineering, or hiring, or management. You'd expect skill at fundraising to be anti-correlated with some other important skill, then, because you don't have time to get good at some other skill you need. I've never seen a startup where the founders knew everything they needed to at company formation. Usually it's one giant, steep learning curve.
  - edanm 12y ago
    That makes sense. But let's say you have some underlying quality, say intelligence or ambition or determination or "grit". This quality will probably correlate with success at both fundraising and building/running a company. Now I don't have anywhere near the experience of YC or even you, but I wold imagine that at least intelligence and determination are positively correlated with both. So I'd expect someone who is good at fundraising to also be good at the rest. There could be a few reasons why this might not be the case. It could be that we're looking at a small subset who have already passed an intelligence/determination threshold, above which these 2 traits matter less, and time spent developing the proper skills matters more. It could be that there are other factors in raising money or building/running companies which matter more, which would be an interesting conclusion to me. Or it could be that I've made an error in reasoning somewhere :)
    - nostrademons 12y ago
      Let's say that having high intelligence makes you 5% more effective per standard deviation at everything you do, but deliberate practice makes you 10% more effective per week at whatever you practice. Now take two founders, one of whom is twice as effective at fundraising as the other. There are a couple possibilities: maybe he spent 7 weeks more time practicing fundraising than the other, or maybe he spent 6 weeks more and is 2 standard deviations more intelligent. If he spent 7 weeks more time practicing, then the other founder who devoted that to, say, customer development will know the market twice as well. But even if he spent 6 weeks practicing and gets a boost from his higher intelligence (equivalent to 1 week of practice), the other person is still 60% more effective at the other stuff. This model is very much simplified, but illustrates a big point that I took a long time to learn: small broad-based improvements take much longer to pay off than targeted, high-% improvements in narrow areas. So yes, being intelligent is nice, it helps slant every skill you learn in your favor. But it is no substitute for actually practicing hard and removing errors. There are similar counterintuitive principles at work in many other areas. I've found that engineering tools or frameworks that promise a few percent improvement in productivity are rarely worth learning and almost never worth developing unless they have a huge userbase, because it may take you 2 months to develop them but if they save you 5% in development time it'll take 40 months to break even, by which time they're probably not applicable anymore. Similarly, you are almost always better off hiring the person with little experience who is really passionate about your company, rather than the guy who is seemingly a genius at everything he does but really doesn't care about you or what you do. It's probably also behind the YC advice to be "narrow and deep" when building for customers; you can improve the product much more quickly when directly targeting a small userbase than when trying to please a large one.
- amirmc 12y ago
  You could think of it this way. If someone is really, really good at sales, would you expect them to also be great at (say) general management too? I wouldn't. A company needs all kinds of complementary skills but in the beginning it only has whatever the founders can bring with them.
  - edanm 12y ago
    That's a good point. Let's put it this way - if someone is really good at sales, I'd think they're more likely to be good at general management, given enough time to learn that skill. In the cases of companies, since the founder's job is usually to learn whatever skills are relevant for the current state of the company, and then execute those reasonably well, I'd expect the founder to learn the currently relevant skill of fundraising, then later to learn the currently relevant skill of managing a small startup, then later to learn the currently relevant skill of managing a larger company, etc.
    - amirmc 12y ago
      Your argument essentially boils down to 'anyone great at X should (eventually) also be great at Y'. I don't believe that and it seems like a difficult thing to persuade you of -- at least right now. Also, think about the time component. Even if your viewpoint were true, there isn't always time in a startup to become proficient in a skill you don't yet have. If it were that easy, startups would be a lot simpler.
      - edanm 12y ago
        "I don't believe that and it seems like a difficult thing to persuade you of -- at least right now." Well, evidence to the contrary should persuade me. But isn't that pretty much the definition of IQ? A kind of "general intelligence quotient" which is broadly applicable to many different skills? E.g. I'd expect Stephen Hawking to be pretty good at chess if he ever decided to apply himself at it.
    - aetherson 12y ago
      When I was a TA at my college, in the introduction to CS class, I noticed the following: 1. There existed people who clearly were, in general, intelligent, hardworking people who completely and totally DID NOT GET computer science. It was frustrating dealing with them, because they were accustomed to the idea that if they put in effort, they mastered subjects -- but it wasn't happening for CS. At least, in a semester. 2. There were people who really "got" iterative programming but were completely flailing when it came to functional programming. 3. There were people who really "got" functional programming but were completely flailing when it came to iterative programming. Now, on some level, I'm sure that there is an underlying general intelligent/merit thing going on. Nobody who got into my college was an idiot. I'm sure that even the people who were struggling were doing better than would a hypothetical person with a mental disability whose development never got past the 6-year-old level. But it seemed clear to me that there is a measure of differential, narrow aptitude in the realm of computer programming, not just general aptitude. I would imagine that there is also narrow aptitude in sales, investing, running a company, etc.
robg 12y ago
it's really important to think independently and take the time to really get to know founders and understand businesses Will this view carry over to YC interviews? 10 mins does not engender this outcome.
- sama 12y ago
  no. at the stage of YC, we're looking for something very different. (though we do try to think independently :) ) we put a small amount of money into a large number of companies. the most important thing is that we not miss a potential huge company; we're willing to make a lot of mistakes of inclusion to that end. when you're making just a small number of high-dollar bets, you have to handle it very differently.
  - vasilipupkin 12y ago
    There is some non-zero amount of luck involved in one of YC companies becoming huge. Do you think you have insights into which ones are more likely than not? given that you have pre-screened the companies to include strong founders, is there predictability above and beyond that initial screen?

by sama 12y ago

deleted 12y ago

[deleted]

holoplus 12y ago

This is intuitive - Startups that follow all fail - Investing in startups should be the same Curious if there are patterns in why the hot ones Fail ?

S4M 12y ago
Don't forget that any startup has by definition a low probability of success - maybe the best ones have something like 20% (a ballpark) - so I don't think there's a definite pattern to predict successful startups.

edanm 12y ago

Curious thought- you mention the (unsurprising) thought that people who are good at fundraising aren't necessarily good at running a company. But, all other things being equal, I'd expect someone who's good at "winning" at the game called "raising money" to be the type of person who is better at winning at other games, e.g. running a good company. In other words, while being good at raising money doesn't necessarily mean they're good at running a company, I'd still take them over the "average person". You seem to imply the opposite in your post - is that really right? Maybe people who are good at fundraising have spent too much time/energy on that vs. getting good at building a company? That sounds specious to me.

nostrademons 12y ago
If the skillsets needed to found a company are largely independent and time spent learning them is a limiting factor - both of which are true in my startup experience - then time spent learning the fundraising skillset cuts into time spent learning customer development, or the particulars of your market, or engineering, or hiring, or management. You'd expect skill at fundraising to be anti-correlated with some other important skill, then, because you don't have time to get good at some other skill you need. I've never seen a startup where the founders knew everything they needed to at company formation. Usually it's one giant, steep learning curve.
- edanm 12y ago
  That makes sense. But let's say you have some underlying quality, say intelligence or ambition or determination or "grit". This quality will probably correlate with success at both fundraising and building/running a company. Now I don't have anywhere near the experience of YC or even you, but I wold imagine that at least intelligence and determination are positively correlated with both. So I'd expect someone who is good at fundraising to also be good at the rest. There could be a few reasons why this might not be the case. It could be that we're looking at a small subset who have already passed an intelligence/determination threshold, above which these 2 traits matter less, and time spent developing the proper skills matters more. It could be that there are other factors in raising money or building/running companies which matter more, which would be an interesting conclusion to me. Or it could be that I've made an error in reasoning somewhere :)
  - nostrademons 12y ago
    Let's say that having high intelligence makes you 5% more effective per standard deviation at everything you do, but deliberate practice makes you 10% more effective per week at whatever you practice. Now take two founders, one of whom is twice as effective at fundraising as the other. There are a couple possibilities: maybe he spent 7 weeks more time practicing fundraising than the other, or maybe he spent 6 weeks more and is 2 standard deviations more intelligent. If he spent 7 weeks more time practicing, then the other founder who devoted that to, say, customer development will know the market twice as well. But even if he spent 6 weeks practicing and gets a boost from his higher intelligence (equivalent to 1 week of practice), the other person is still 60% more effective at the other stuff. This model is very much simplified, but illustrates a big point that I took a long time to learn: small broad-based improvements take much longer to pay off than targeted, high-% improvements in narrow areas. So yes, being intelligent is nice, it helps slant every skill you learn in your favor. But it is no substitute for actually practicing hard and removing errors. There are similar counterintuitive principles at work in many other areas. I've found that engineering tools or frameworks that promise a few percent improvement in productivity are rarely worth learning and almost never worth developing unless they have a huge userbase, because it may take you 2 months to develop them but if they save you 5% in development time it'll take 40 months to break even, by which time they're probably not applicable anymore. Similarly, you are almost always better off hiring the person with little experience who is really passionate about your company, rather than the guy who is seemingly a genius at everything he does but really doesn't care about you or what you do. It's probably also behind the YC advice to be "narrow and deep" when building for customers; you can improve the product much more quickly when directly targeting a small userbase than when trying to please a large one.
amirmc 12y ago
You could think of it this way. If someone is really, really good at sales, would you expect them to also be great at (say) general management too? I wouldn't. A company needs all kinds of complementary skills but in the beginning it only has whatever the founders can bring with them.
- edanm 12y ago
  That's a good point. Let's put it this way - if someone is really good at sales, I'd think they're more likely to be good at general management, given enough time to learn that skill. In the cases of companies, since the founder's job is usually to learn whatever skills are relevant for the current state of the company, and then execute those reasonably well, I'd expect the founder to learn the currently relevant skill of fundraising, then later to learn the currently relevant skill of managing a small startup, then later to learn the currently relevant skill of managing a larger company, etc.
  - amirmc 12y ago
    Your argument essentially boils down to 'anyone great at X should (eventually) also be great at Y'. I don't believe that and it seems like a difficult thing to persuade you of -- at least right now. Also, think about the time component. Even if your viewpoint were true, there isn't always time in a startup to become proficient in a skill you don't yet have. If it were that easy, startups would be a lot simpler.
    - edanm 12y ago
      "I don't believe that and it seems like a difficult thing to persuade you of -- at least right now." Well, evidence to the contrary should persuade me. But isn't that pretty much the definition of IQ? A kind of "general intelligence quotient" which is broadly applicable to many different skills? E.g. I'd expect Stephen Hawking to be pretty good at chess if he ever decided to apply himself at it.
  - aetherson 12y ago
    When I was a TA at my college, in the introduction to CS class, I noticed the following: 1. There existed people who clearly were, in general, intelligent, hardworking people who completely and totally DID NOT GET computer science. It was frustrating dealing with them, because they were accustomed to the idea that if they put in effort, they mastered subjects -- but it wasn't happening for CS. At least, in a semester. 2. There were people who really "got" iterative programming but were completely flailing when it came to functional programming. 3. There were people who really "got" functional programming but were completely flailing when it came to iterative programming. Now, on some level, I'm sure that there is an underlying general intelligent/merit thing going on. Nobody who got into my college was an idiot. I'm sure that even the people who were struggling were doing better than would a hypothetical person with a mental disability whose development never got past the 6-year-old level. But it seemed clear to me that there is a measure of differential, narrow aptitude in the realm of computer programming, not just general aptitude. I would imagine that there is also narrow aptitude in sales, investing, running a company, etc.

robg 12y ago

it's really important to think independently and take the time to really get to know founders and understand businesses Will this view carry over to YC interviews? 10 mins does not engender this outcome.

sama 12y ago
no. at the stage of YC, we're looking for something very different. (though we do try to think independently :) ) we put a small amount of money into a large number of companies. the most important thing is that we not miss a potential huge company; we're willing to make a lot of mistakes of inclusion to that end. when you're making just a small number of high-dollar bets, you have to handle it very differently.
- vasilipupkin 12y ago
  There is some non-zero amount of luck involved in one of YC companies becoming huge. Do you think you have insights into which ones are more likely than not? given that you have pre-screened the companies to include strong founders, is there predictability above and beyond that initial screen?