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$10B? That's awfully large, and closing the door on a lot of ideas. What if you just want to solve an important problem by selling a product profitably and don'

by koops 12y ago

$10B? That's awfully large, and closing the door on a lot of ideas. What if you just want to solve an important problem by selling a product profitably and don't want to grow to enormous size? I guess you look somewhere other than Y Combinator to get started.

atroyn 12y ago
If that's the plan, you don't need YC in to get started.
zarriak 12y ago
The point of the lower limit on the value of the company is not based on what might turn out to be a 1 billion dollar company. There are many more ideas in hardware than there are in software, purely based upon how accessible it seems. If you are solving anything close to an important problem, you will eventually reach a $10B valuation. A software company can grow to a reasonable size that is nowhere close, but hardware companies don't follow the same path. Solving a problem with hardware either solves a problem or replaces the thing that fixed the problem before. Solving a problem with software is usually (if not always) making computers better or easier to use. The underlying difference is how clear the change is in the user's life. The much larger cost to develop and produce hardware like some in the comments have been discussing leads us to value hardware much more significantly than software. It might be due to iTunes, Java, and Windows update making people mad when they waste their time, or have their computer shut down on them in the middle of their work, but there is a significant bias.
toong 12y ago
If you're outlook is a $10M or even $100M valuation, VCs and even angels would not interested.
- jacquesm 12y ago
  Plenty of funds would be happy with exits in the $100M range. The billion dollar exits or IPOs are the exception, not the rule and a $50M exit is a damn sight better than a failure. Of course it all depends on when they joined that particular party, the later in the game the higher the exit would have to be to make those investors happy.
  - acgourley 12y ago
    Certainly they would pop a bottle for that 100m exit when it happens, but at the funding stage there is a case to be made for chasing deals in markets large enough that a 10B exit is at least possible. Because 10B might happen and that does a lot to the EV calculations. Even if it doesn't, some might think that startup has a better chance for reaching the 100M mark sooner.
  - toong 12y ago
    Of course is $50M exit a lot better than a failure. My point was: if $50M is your maximum potential - if everything goes perfect - it'd be pretty hard to get some interest from VCs. For their math to work out, they need at least the potential for an exit a few orders of magnitude more than their investment. If VC rounds start at $1M, a max potential of $50M will not be taken into consideration so easily ?
vasilipupkin 12y ago
it doesn't really close the door on most ideas in the sense that everybody realizes that the likelihood of being a $10B is quite small. But if it is literally zero, then this company may not be the right fit for YC. I would say if you think the likelihood of your company being worth $10b is zero, you should carefully think about why you think you need venture money in the first place.

by koops 12y ago

atroyn 12y ago

If that's the plan, you don't need YC in to get started.

zarriak 12y ago

The point of the lower limit on the value of the company is not based on what might turn out to be a 1 billion dollar company. There are many more ideas in hardware than there are in software, purely based upon how accessible it seems. If you are solving anything close to an important problem, you will eventually reach a $10B valuation. A software company can grow to a reasonable size that is nowhere close, but hardware companies don't follow the same path. Solving a problem with hardware either solves a problem or replaces the thing that fixed the problem before. Solving a problem with software is usually (if not always) making computers better or easier to use. The underlying difference is how clear the change is in the user's life. The much larger cost to develop and produce hardware like some in the comments have been discussing leads us to value hardware much more significantly than software. It might be due to iTunes, Java, and Windows update making people mad when they waste their time, or have their computer shut down on them in the middle of their work, but there is a significant bias.

toong 12y ago

If you're outlook is a $10M or even $100M valuation, VCs and even angels would not interested.

jacquesm 12y ago
Plenty of funds would be happy with exits in the $100M range. The billion dollar exits or IPOs are the exception, not the rule and a $50M exit is a damn sight better than a failure. Of course it all depends on when they joined that particular party, the later in the game the higher the exit would have to be to make those investors happy.
- acgourley 12y ago
  Certainly they would pop a bottle for that 100m exit when it happens, but at the funding stage there is a case to be made for chasing deals in markets large enough that a 10B exit is at least possible. Because 10B might happen and that does a lot to the EV calculations. Even if it doesn't, some might think that startup has a better chance for reaching the 100M mark sooner.
- toong 12y ago
  Of course is $50M exit a lot better than a failure. My point was: if $50M is your maximum potential - if everything goes perfect - it'd be pretty hard to get some interest from VCs. For their math to work out, they need at least the potential for an exit a few orders of magnitude more than their investment. If VC rounds start at $1M, a max potential of $50M will not be taken into consideration so easily ?

vasilipupkin 12y ago

it doesn't really close the door on most ideas in the sense that everybody realizes that the likelihood of being a $10B is quite small. But if it is literally zero, then this company may not be the right fit for YC. I would say if you think the likelihood of your company being worth $10b is zero, you should carefully think about why you think you need venture money in the first place.