"If I were Paul Graham, these types of companies simply would not satisfy me (despite what look to be very lucrative payoffs)."
That's hilarious, because I'm the one who wrote all the summaries
of the startups that she's judging them by. I deliberately express
startup ideas as x for y whenever possible because that's the most
efficient way to describe a startup in a few words. Airbnb, for
example, was in its day "eBay for space."
On Demo Day we accompany each startup's name with a brief summary
of what they're doing. The goal of these summaries is not to convey
the full breadth of a startup's eventual ambitions, or even what
they're currently doing, but just to help investors watching 65
presentations remember which company is doing what. TechCrunch
reused these descriptions, as reporters often do. And now this
woman has read the summaries printed in TechCrunch and is treating
them as if that were all there was to know about the startup. It's
like a game of Telephone (http://en.wikipedia.org/wiki/Chinese_whispers).
My standard advice to startups presenting to investors is that it's
better to start with an overly narrow description of what you do,
so that investors at least know what you're talking about, and then
expand from there.
It's surprising to me that someone who wasn't even at Demo Day would
feel confident enough to judge the startups' originality based on
the 3-5 word summaries we use on the schedule to help investors
keep them straight in their heads.
I was about to say that it's also surprising that people would
upvote such a post. But on reflection it's not that surprising.
I will explain what I think from the point of view of an engineer: none of the companies inspired me to apply for a job to work for them. Probably the problem is that I'm not smart enough to see the grand vision: the vision of these companies is just not clear for mortals like me.
For example, I was hoping to see something like Word Lens on iPhone: I can see how they can rule the world. That is something frighteningly ambitious.
Like I keep saying, the descriptions she's writing about were not meant to sell people on the company's vision, but simply to help investors remember which was which.
How has Word Lens taken over the world? It is an awesome technology, but there are many awesome technologies, and not many of them become amazing businesses. (However, that said, there are awesome technologies like the Word Lens in this class of YC).
When Facebook started off people just said it was MySpace for college students. Those with imagination that joined early now reap the benefits of vision.
I certainly wouldn't use that word. You wouldn't say a dating site had vision. Facebook falls in that category. Awesome achievement, but no real vision and it's going into no other fields, like google did for example.
Although I don't mean that the other ones aren't worth working for, I'd say I'm surprised that you don't think Flutter is an interesting company to work for.
It seems like it could be a very exciting playground for an engineer.
I wasn't at the Demo Day, but it's hard to consider making car repair more efficient to be a problem that really matters. Not saying it can't be a decent business, but your essay about ambitious ideas was pushing people to do better.
I am just baffled by the idea that people here think there isn't a huge dent to be made in the universe in auto repair. There are 723,400 auto mechanics in the US alone, making a median of $35k in an incredibly inefficient marketplace that fleeces and inflicts misery on millions of working class families (who get to work and their kids to school in cars, not fixies) every year.
Lets not go overboard - I'm sure some customers have their complaints but your making the car repair industry sound equivalent to today's Wall Street. I genuinely rarely hear people complain about car repair - now if we were back in 1970 or 1980 Id have a different opinion.
He's not going overboard. When you don't know anything about cars, it's really hard to find a mechanic or car repair shop you can trust. One reason I always try to help people who ask me any question about their computer is that I just think of how ignorant and defenseless I've felt when my car breaks. I do what they do: find the person in my life who knows the most about it and cling to them like a drowning man.
If the Your Mechanic guys can solve this problem, they'd be rewarded with fantastically loyal customers (including me) in a big market. Actually I'm a little bewildered why anyone would see this as an unambitious idea. It sounds hard to me.
Agreed, it's not an overreaction. As an auto enthusiast and someone who has a large group of friends that are also auto enthusiasts we are acutely aware of the issues our non-enthusiast friends have with the auto industry.
We're aware because they come to us with their problems and seek advice. Everything from helping to buy a new car to trying to understand what the mechanic was telling them is wrong with their car.
When I was younger I worked at the front desk of a reputable auto shop. It was very common for customers to mistrust us, and they had good reason to feel that way, too. Not because our particular shop was bad - it wasn't - but because many others are.
The auto industry is huge and has many huge segments that can be targeted. There is room for many companies to grow into significant players.
If you want to take on a problem as big as the ones I've discussed, don't make a direct frontal attack on it. Don't say, for example, that you're going to replace email. If you do that you raise too many expectations. Empirically, the way to do really big things seems to be to start with deceptively small things. Want to dominate microcomputer software? Start by writing a Basic interpreter for a machine with a few thousand users.
So for all we know, there are a bunch of YC companies aiming to take over the world, but we just don't know about them since they start off by tackling a very specific, narrow niche. Take greplin for example. I could envision the founders aiming to eat Google's lunch one day, but they certainly didn't launch by announcing that to the public.
Every car owner wastes time and money at repair shops that tend to be so opaque and corrupt that there are sitcoms about it. Most mechanics employed by these shops get paid much lower than they can charge as an independent mechanic.
Yet, the middlemen who run the shops make many times more than the sum of the cost of labor and parts.
Are you saying that trying to fix this for the 250M+ car owners in America is a problem that doesn't really matter?
Perhaps off topic, but I bought an altair in 1977 and did a bunch of consulting based on it. Accounts receivable, inventory for a local furniture store. I was insanely excited.
Edit: (In fact when the intel 4004 came out, I was a little frightened that it was going to disrupt our business built on the Sigma 5, but then I realized that it would need software like the stuff we were writing.)
I have to disagree. For many Americans, car repair is one of the most expensive and opaque processes out there. Most people who drive have a critical need for that transportation, so when their car won't go, they pretty much have to suck it up and pay whatever fees the mechanic pulls out of his ass.
My point being, this type of disruption would be a very big deal for your average joe.
I'm curious what it is about Your Mechanic that will make the process any less opaque for the end user?
Ok, so they arrange for the "best" mechanics to come to you to fix your car. The coming to you is cool, and certainly improves convenience. But lessens opaqueness? Not seeing it.
What guarantee is there that the whole thing won't just turn into something like the big car repair chains are now? "Looks like you got a burned out frabulator, that's gonna run you about 14 hunnert." And the customer doesn't know if they do or not, they just have to trust this "best" mechanic. What about this system prevents that, which is the part that most people hate about dealing with mechanics. The big chains already have standardized pricing, that's not the problem here. The problem is trusting that the work being done is what needs to be done.
What's the criteria for "best"? How will they keep the criteria from slipping as they go through explosive growth?
It's not that I don't think the system can't be disrupted, it's that I think it's going to be a lot of work for marginal improvements. I don't see how it's going to be transformative.
If they are even mildly successful in this one niche they are going to see four me-too startups in three months (one of which will be bought by a national auto parts chain before the year is out) and see the core idea applied to five other niches before they close an A round.
...and eBay sold trinket-junk at first. I wasn't at demo-day but it's easy to see a path of iterations that goes from mechanics repairing cars today, to plumbing, to other trades to people designing and building real-world houses from their computers tomorrow.
I'm not saying this is where it is going, and as an investor you can not value a business based on these far-out ideas. But as a hacker/entrepreneur I imagine the founders are having dreams every bit as lofty as the one I just presented.
I don't know if it's fair to say it's like Telephone. From what you're describing, she's reading exactly what the lead investor in these companies had to say about them.
I mean this in the best way possible, but if the descriptions don't sell the vision of the company, maybe that's something that needs some attention?
It seems difficult to analyze the degree of ambition in any given startup from PR. Although ambition makes for a good story, it doesn't necessarily sell product/get users. So it seems, early stage startups focus on simple messages which the audience will understand. Look at the evolution of PR coming from Air BnB over time.
Paul Graham said don't attack the problem head on. Make a beachhead. Supposedly these seemingly dull ideas are beachheads.
That was covered in a previous HN discussion about a similar article questioning YC startup ideas in practice.
But something like Dropbox seems to have a hard time scaling out, exploring other ideas, and that's with a founder who wants to build a big company like Apple.
Even if you start with a beachhead, it should be one that can grow. Apple started with a PC, to grow they made more and better PCs. Microsoft/Gates started with BASIC then pivoted drastically to an idea that could grow, an OS for PCs. What will Dropbox grow or pivot to in order to be an Apple size company? Hard to imagine backups for teams or iCloud but OS independent will be the ticket.
Supposedly these seemingly dull ideas are beachheads.
Are they really, though? It seems to me that many successful startups are simply bought over by another big company and their "beachhead" is eventually lost in the acquiring behemoth.
This beachhead thinking is key. The trouble is that it is harder to represent in the “we’re X for Y” way, which is usually the thing that sticks with the audience (which is also the reason why it works so well).
But an X for Y beachhead doesn't make the current idea scalable. Perhaps it's a beachhead for the founder to get a reputation so maybe one day he can try a scalable idea, either in the current company or some future one. But it doesn't mean the pivot will be related to the current X for Y.
It worked out for Microsoft. But somewhat contradictory to this scenario Paul Graham also said to start chipping at the ambitious idea because starting companies is hard anyway.
So looking at seemingly dull ideas of YC, is there some way for them to scale without pivoting as far as Microsoft did?
dailyllama, looks like you've been hellbanned. None of your comments are out of order or trolling, so I thought I'd let you know. You might be able to contact someone at ycombinator and get yourself re-instated.
If ever someone wants to know why hellbanning is stupid, you can point them here...
X for Y, where X = "Airbnb" and Y = "Large existing market poorly served by technology", is in fact a good shorthand for "frighteningly ambitious".
Literally. Airbnb is a frighteningly ambitious company. It is explosively generating value and we don't know how it's going to play out long term. It could end up with us living in caves with dogs watching out for the Terminators.
It is hard for me to take the rest of the article seriously after it suggests that "Airbnbing" auto mechanics is unambitious. It's possible that most Americans have routine car service done at dealerships where they're being routinely fleeced, and that the current crappy system of servicing vehicles is driving talent either out of the businesses or to those giant dealership shops. Have you ever tried to find a reliable mechanic? I drive an old Audi. It's painful.
I'm not sure, maybe you have a different definition of 'frighteningly ambitious' to me. What is the largest possible outcome from making it slightly easier or cheaper to repair your car? It saves a few million Americans a few hundred dollars?
My definition would be more like: sending ordinary people into space; making a mass-production electric vehicle; cheap solar power; curing flu/the common cold; inventing a new type of computing device; replacing huge incumbent companies (telcos, oil); reducing home electricity usage by >50%; inventing a new human-computer interface. Etc.
If reconfiguring a huge chunk of the automotive industry seems unambitious to you, and the only thing that will truly impress you is orbital death rays and zero point energy, there's not a whole lot for us to discuss.
This is a silly argument. It will always be possible to name something more ambitious for a startup to do. What, you're only taking tourists into suborbital space? A truly ambitious startup would build MOON BASES.
Let's say I wanted to solve a really big problem. Not something comparatively simple like "new kind of computing device", but really big. Global. Like the fact that we tear through so many natural resources because people go out and buy new equipment so often instead of getting old equipment repaired. That is a major ecological problem of the 21st Century right?
So I look into it and I discover that one of the main reasons that people replace a broken device is because it's really easy to go buy a new piece of gear (everyone wants to sell you one!), and much more trouble to track down someone who will repair an old one (properly!) and go deal with whatever's involved in getting it done.
OK, that's an interesting problem to solve, right? But if people are throwing away devices, how do you get everyone to change their behavior? That's really hard, especially for a startup with limited resources.
So what's a minimum viable product to get started with? Well, what if you started with a way to let people get their cars repaired more easily? People already get their cars repaired, and the user experience is terrible. Solve the part of the problem that people know they need solved first (car repair), then move on to convincing them they want other things repaired too. That they don't need a new gadget every two years, they just need an easy way for someone to help them keep their old one in good repair.
And if it works, that's tons (as a measurement of weight) of working devices that don't go into landfills, and tons of natural resources that aren't used up making devices to replace them. Is that ambitious enough for you?
(Note: I have no idea if this is what the founders are actually thinking or not. I just know that you can't judge the ambition of a startup from their first product.)
Impactful changes will often significant because of their nth order, not just their direct effects.
For example, Google Adwords has completely changed how customers are acquired for a lot of industries. This changes how companies are structured, which companies succeed and how they are built. That's a big change.
Lets stretch the mechanic example. If people got better, cheaper, easier mechanics this could make them hold on to cars for longer. This could in turn change the way cars are built and change the structure of this giant industry.
No startup could tackle those tasks, not on YC's scale. Any one of those is so capital intensive or research intensive you'd have to either get rich at a boring pay-people-over-the-Internet startup or be a huge corporation with research labs like Bell Labs or Xerox PARC.
A few hundred dollars for a few million Americans is a billion dollars of economic impact per year.
The reason why I think that it is difficult to say a frighteningly ambitious startup idea is actually something that is expected to come through YC, is that the funding that YC provides is miniscule, and will cover hardly an annual salary for a single, accomplished person who has a lot of domain knowledge in a field they may want to disrupt.
As someone in the medical space who is 37, married with 2 kids - My salary is more than the funding of YC - and I would not be able to take ~150K and divide it among multiple founders -- let alone have that funding cover, you know, actual startup expenses.
I feel I am in this catch-22 limbo area -- too old and too ambitious of an idea to fit the YC mold.
Personally, I see YC as being fairly myopic in the type of people they fund, and it is frustrating because I think YC is incredible!
Sure, there are tons of opportunities for nifty apps that serve a silo of a need (even if that silo is infinitely deep) -- but the idea I have to revolutionize the hospital space can't feasibly be built on 150K - unless I take that funding whilst retaining my full time job to pay for me and have that 150K go directly to the product.
Being simultaneously unable to walk away from a six-figure salaried income and unable to bootstrap a company probably doesn't correlate well with "likely success as company founder".
You'd make a more compelling point if it was "I think the small amount of funding is going to prevent YC from generating ambitious companies because it was easier for me to start $COMPANY_I_CURRENTLY_RUN without YC". But anecdotally, it's the opposite: people fully capable of funding their companies are going to YC for the network and for the automatic increase in valuation.
You can compare other startup creation vectors that you have knowledge of to YC, but it's awfully hard to make a valid comparison between YC and a salaried job. If you're going to stay in a salaried job in our current white-hot market, you probably weren't going to start a company no matter what.
(There's nothing wrong with not starting a company. Even if YC starts 10 hugely ambitious, Airbnb-scale successes this cycle, it will still wash out a huge number of other companies. Careers made in salaried jobs have a lot to recommend them, and financial outcome is definitely one of them.)
An earlier version of me used to make the same point. "$20k for 6 points! That's a CEO's equity grant and one consulting project's revenue!" I feel dumb about that critique now that YC companies all seem to be getting uncapped convertible notes with minimal drama, and now that the YC network includes so many successful companies. Obviously, the YC money isn't the big draw anymore.
Either I didnt articulate my point well enough, or you misunderstood it.
The idea that YC can fund a web-app, mobile-app or completely web-based feature-as-a-service for 150K is well founded.
My point is that within the realm of "ridiculously ambitious ideas" are those that would require a shitload more seed capital to build out.
Do you think that SpaceX, which is obviously ridiculously ambitious, was seeded with simply 150K? Tesla? (obviously these are from the same ridiculously ambitious founder - but a well heeled founder with deep pockets.
I AM saying that there are certain dynamics which YC can't accommodate best.
YC is an absolutley stellar platform, but I would suggest that there should be a separate entry/avenue for projects which are not exactly suited for the traditional YC channel.
Maybe they could start out with "$150K to prove out the idea, consult with other experts in this space and connect with those who can help the idea along"
The point being that the initial 150K is not necessarily expected to going to the actual development of product as much as it is going to the furthering of the project.
EDIT:
I also wanted to point out that I failed in mentioning that the value that YC provides, with respect to exposure, network, connections, etc is immeasurable.
I am really just trying to say that for some groups/founders/cases/ideas -- You cannot look at the 150K funding and think that there will not be other struggles/issues.
I'd like a way to openly address/discuss this and find out what is best for each case.
PG: YC is the best thing to hit the valley since the transistor.
Now you're zigzagging. Your original point was that YC might have trouble finding ambitious startups because the 150k YC companies end up getting isn't enough to get you out of your salaried job. That argument has an easy response: getting you out of your salaried job has a low expected ROI.
The rest of this point is just the same tired argument: yes, for any given startup, there is a more ambitious startup you can either point to or theorize. Which of them were ambitious startups of the kind postulated by Graham's post about ambitious startups?
Late edit: it's also a bit amusing that the two examples that spring to mind, SpaceX and Tesla, are two crazy shoot-the-moon ideas that could only have been the product of the force of will of someone like Elon Musk. Could you even imagine a seed funding model that would attract Elon Musk? What would it have to include? You might as well argue against the whole concept of seed funding.
First, If I am zigzagging - I am thinking out loud here on HN - and am happy to hear how I am wrong. SO please forgive me if I do contradict myself as I am trying to find the best way to articulate my thoughts.
I am fully open to being shown that I am flat wrong.
With that said:
Could you even imagine a seed funding model that would attract Elon Musk? What would it have to include?
This is part of my point. I can't think of such a ridiculously ambitious idea being seed funded.
PG said he wants the ridiculously ambitious ideas - I am saying that such ideas are likely not achievable with the traditional YC model.
So, to the second half of your comment; "What would it have to include?"
I am not sure, but lets think out loud here for a sec:
Given we are looking for the truly revolutionary ideas - what assumptions need to be in place in order to attract, identify, foster and enable these ideas:
First; lets recognize they can come from all walks.
We need to be able to evaluate the ideas, quantify the effort and impact and accommodate whomever they may come from.
Maybe THIS is what the available YC resources should be positioned to do.
"You might as well argue against the whole concept of seed funding"
Maybe I am naive - but what if we change what our meaning of seed funding is within this context -- The seed funding is not for MVP, or first launch - the seed funding is exactly that - to seek out, identify and locate the seed - carry it and THEN plant it.
Again - please tell me if I am just sounding stupid - I am trying to think outside of constraints/conditioning I have observed in the traditional funding model.
YC has a model that seems like it would have stood a credible shot at capturing Google in 1997.
That there are companies more ambitious than Google that wouldn't even consider a "seed stage" is not, I don't think, particularly relevant.
Also: the point of YC is to put fingerprints on the maximal number of successful startups. Ideas from people who aren't inclined to start companies aren't a particularly important part of that. You lost me with "revolutionary ideas". Ideas aren't what's important.
the point of YC is to put fingerprints on the maximal number of successful startups
One thing about YC that doesn't get enough attention is that by coming up with a model and articulating it (and generally doing everything) in a way that makes sense to hackers, they have grown the total number of startups. That is, some people who wouldn't have otherwise have founded a company have been inspired to do so. YC have made the pie higher! http://politicalhumor.about.com/library/bljokebushpiehigher....
In my opinion all sorts of social and macroeconomic good may emerge from this.
If I remeber well the funding principles of YC, if you can call them like that, that's exactly the reason why they don't fund biotech start-ups for example. "Those are still ridicolously exapnsive" I think were the exact words used. The real value I see YC is providing to founders, no matter of the age, is access to a incredible network and contacts, funding that gets you over the three months of the programm plus the 150k $ you get without a lot of trouble. This way they take away a lot of pain in ther initial funding process. Combine with the access to top tier VCs and your money problem should become considerably smaller.
That said, it's true thats it's way easier if you are young with out a family, but still not impossible. The best scenario I could dream of is a year long payed sabatical while you are in YC. If you have an employer who's offering you that...
Spot on - in fact I wonder if YC would be open to "funding" more groups if some of those groups didn't need the money? For us it's about the network like you pointed out.
At 60+ companies in a cycle I think they're already going to start butting up into dilution.
If you have a program that is attracting the 60+ most viable candidates to start companies, it's kind of odd to expect that group to go into left field to start tapping risk-averse people for whom salaried jobs are so attractive they'd skip YC.
There's nothing wrong with those people! But the whole point of startups is to capitalize on timely combinations of risk tolerance and talent.
Can you imagine Larry Page and Sergey Brin taking Backrub to YC, had it existed, in 1997? It was their first startup. Am I saying they obviously would have? No. But I wouldn't have been surprised.
I'm 41, married, and have 3 kids - my "cofounder" and I have just applied to YC for Summer 2012. I've been running in "start up" mode since around 2000, so my lifestyle has adjusted to a much lower level of pay than I would expect had I continued working in the fortune 500 as a developer, but I don't regret a single moment of it.
Even though your idea is ambitious, you might consider nights/weekends to work on it - you know the whole "a journey of a thousand miles begins with a single step" - get something together and see if you can raise some funding - you never know. There's a lot of money being throw around right now.
I think YC is setup so it attracts those who are willing to go out on a limb for an idea, since (and this is a guess) they might be the most likely to persevere through the rough patches and stick with their idea until it succeeds.
Thank you. Your voice was missing here for a while.
32, married. As of yet I have no offspring, but that's going to be corrected. Still, I lurked and commented here, always with the 'Ahhh.. If I'd be without ties and responsibilities once more' thought.
I cannot tell you how glad I am to read that someone with arguably more responsibilities in life and a bit older than me (another point that is rarely coming up here) gives a damn about conventions and prejudices and just joins the otherwise ramen-eating, single, < 27 crowd.
When I quit my full time job in 2005 I can't tell you how many people thought I was seriously crazy to leave a "stable" job to do something on my own. For me however, it really wasn't a choice - it was something I had to do.
I've always believed that there are millions of people in this world who would be willing to work harder than me if only they had the opportunities I have been given in my life. To not take full responsibility for my life and work as hard as I can to achieve something feels disrespectful to those who WOULD if they had the chance. I know that may sound a bit cheesy, but it's been an important driver in my life since I've gone solo.
We're not all eating ramen and single. Yes, when you're married with kids and a mortgage the immediate risk is greater, but that doesn't mean us <27's are immune or ignorant of risk. Many of us have 100k in school loans. Even the ones who don't are not eager to throw away a safe opportunity at an established company to forge out on their own.
I had a tough time finding a cofounder among my peers. Even the most entrepreneurial of them, people who had started things in college, are still far more inclined to go to work for someone else (especially with an offer in this job market). While I know there's a myriad of reasons, I think a most would rather go somewhere where all of the responsibility is on them. If you mess up at a big company, there's hundreds or thousands of others that shoulder the fallout. If you mess up and you're one of 2 or 3 or 4 people....
My point is that it takes courage to start your own company no matter what age you are.
You are so right - I like to think of it as accepting responsibility for your life. Several hundred years ago "starting your own company" could be equated to "going west and creating a new life" - it takes a lot of guts and determination to strike out on your own, and most people would never dream of it.
For what it's worth, I'm 27, married and have 2 daughters and quit my job just a few months after my youngest was born (2 years ago) to join a local incubator and start my startup. Man, the wife wasn't exactly thrilled about that idea though :)
Wow, I'm glad I'm not alone. Married, 32, 3 kids (all girls,yikes!) and a mortgage and working on PhD but still want to do a startup. Glad there still is hope.
Good on ya! I too often people saying - oh, I'm not in my 20s any more so I can't give up my job making $$$ and supporting my family. News flash!!! It's all about priorities and what's important to you. If your dream is to do a startup but you feel hemmed in by your house, car, etc, start thinking about what is important.
On the other hand, I'm working for a small non-startup software company as a salaried developer and love it. I get to focus on developing software and not running a company :)
I live just north of Seattle, WA. I worked at VZW for almost 10 years, but early on decided I wanted to run my own business so basically saved as much as I possibly could - my goal was to have 2 years of "wages" which would give me time to get my product (at that time Jamroom) off the ground. The great news was that as soon as I left my job and could devote full time to my own business, things took off - I didn't even end up touching the money I had saved much. However, the last couple years have been a bit hard as things have been more up and down, so I'm glad to have that savings now.
I can empathise with your situation, but I think you're right about some things and wrong about others.
You're right that its difficult for a mortgaged family breadwinner to give up the stable income. You're right that YC's contribution of $20k or even the $150k convertible note from Conway and Milner isn't going to cut it when spread amongst multiple founders. You're right that a typical startup salary is far below what a skilled person would get if they stayed in industry/academia.
Where you're wrong is in suggesting this means your idea won't fit the YC mould. It's clear from PG's essay that he and YC are definitely keen on helping people with radical, dangerous, or expensive ideas. However, they're not going to change the terms to make it easier for you - the terms aren't set because $20k is a lifeline, they're set because just-above-starvation is the impetus for you to work your arse off getting to profitability.
You're wrong in saying that your idea can't be bootstrapped on $150k. It can - either fake the prototype on less money and keep paying yourself, or take a pay cut and spend the money on the prototype. You even say you could build a prototype on $150k if only you could keep your salary too. The point of that $150k isn't to revolutionize the hospital space, it's to build up enough momentum to make it obvious that the revolution would arrive if only there was more money to finance it - and then to lure that extra money in.
I'm not trying to be hard on you. I'm in a very similar situation, wanting to build a consumer robotics company to put an autonomous robot in every home. Getting to the point where we can actually deliver products to customers will take years and millions. With a mortgage, now a baby, and thus just one income, it's a big stretch for me to give up that money. But, if you won't take that risk, no investor will either.
YC's level of funding is the entry requirement, not the lifeline.
the terms aren't set because $20k is a lifeline, they're set because just-above-starvation is the impetus for you to work your arse off getting to profitability
Respectfully (I don't know you): this is bullshit. The terms are set this way because that's what the market will bear in this specific instance. The idea that the terms of VC deals are structured to align the incentives of founders with VCs is a negotiating tactic and little more.
Misaligned incentives might keep you from taking 6 figures off the table in an A round, but anybody who tells you that they're deliberately calibrating your funding to keep you at a below-market salary is feeding you a line.
There are plenty of founders, some of them first-time founders, who make at, near, or better than market salaries. Most of the difference between them and the people whose boards get them to live on ramen is simple negotiating skill.
This isn't to say that there isn't some "hustle quotient" to be extracted from underpaying founders. Just that it isn't dispositive.
I agree with what you say for later rounds of VC funding (and this is valuable advice for naïve founders!), but I'm talking about YC and other seed rounds/incubators. The idea of this seed stage is to validate the business, getting it to the point where the founders can get more funding from elsewhere. If YC paid much more than $20k then the three months of hacking around might start to look like quite an attractive job. By keeping the funding fairly low, they ensure the ideas aren't overvalued straight away, and that the incentives are aligned. Only founders who back their ideas/team enough to walk away from their jobs for three months, splitting a mere $20k between the team and product, will apply.
Strong disagree. As evidence for my argument: the extremely short duration of YC sessions, and the fact that so many YC companies immediately proceed to grab follow-on funding and market salaries.
We're miscommunicating, because I don't see how that invalidates what I said.
Roughly speaking, the original guy to whom I replied said "YC doesn't provide enough money, so I can't solve hospital care through them." I suggested that this wasn't the point of YC, that the money was appropriate for three months, and that if the idea was really so good, YC would help him get subsequent funding (with which he could pay himself properly).
1) Everyone seems to miss the last 4 paragraphs of pg's essay which discuss tactics for tackling a frighteningly ambitious startup idea: namely, tackle a less ambitious portion of it.
2) YC companies like DrChrono have very large ambitious in the healthcare industry. It can be done through YC.
He has a family to provide for which does need to eat and their well being probably plays a huge role in his decision making. Giving up a comfortable salary to pursue something ambitious may be an easy decision on a personal level, but it may be very difficult on the rest of the family.
The connection to old salary is simply family expectations/lifestyle. That's a real decision and I can imagine dissuades a lot of people. I would be more risk averse if my outcome affected other people I cared about.
Many entrepreneurs dip into personal savings in the initial startup phase. This can be stressful, which is one reason I focused on creating a passive income stream after my own YC startup shut down. So, I'd recommend either accumulating a nest egg or creating a passive income stream (or both) before rolling the dice on a startup.
A lot of founders pay themselves $50-80k/yr once they raise their seed round, and raise funding during YC. Assuming you could survive on 80k/yr salary (which is surprisingly hard in the Bay Area, if you have kids; marry a doctor seems to be a good solution here), I don't see why it should be a problem.
80k/yr plus 30-80% equity in a company, given that YC boosts the valuation, increases odds of success, etc., seems like a decent tradeoff for a mid-career person. The exception might be someone who has a time-limited alternative income source. If I were making $10-20mm/yr as a starting quarterback, I'd probably wait until I got injured or too old to throw a ball to do YC.
From what I recall, only one founder is required to attend YC. So you could theoretically find a younger founder who could attend, while you kept at your full-time job.
Even Twitter wouldn't sound ambitious if you say "we are group SMS for the world".
To better understand how ambitious a startup is, assume that its adoption is 100%. If everyone is using it, does it change lives? If everyone chats on Twitter, does it impact politics? If everyone is on Facebook, do you reconnect with old friends? Etc. Dropbox is in that category too.
With used cars purchases, I can see how everyone would use the site, and still not have any meaningful impact. Cheaper cars. More efficient market. But still, in the end, cheaper cars. Am I missing something?
That's fine when everyone everywhere uses the same OS or all OSs automatically connect to the same back end. But if I want to share files between a Windows box, an iPad, and an Android phone, it's unlikely that anything useful for my purposes will be built into the OS anytime soon.
And even if I insist on buying nothing but Apple (or whatever) products, if I want to share files with my dad or my next door neighbor, now I have to worry about what OS they're running too.
You install Dropbox once per device. After that, it's trivially easy.
OS independent iCloud is a nice feature but hard to see the path to Apple sized scale from it. It's just one of fifty UX headaches of typical computer use. Easier to get at those from OS or browser positions, Dropbox is in a weird spot.
So maybe their next move is to buy Evernote, or build their own. As someone already mentioned, build a suite of document viewers/editors that go hand in hand with managing the files. Go from just allowing you to post a public folder to becoming your personal web presence. Manage cross-social-network personal information so that it always stays in sync.
There are a lot of possibilities if you think past the files.
Sure but it's a distant pivot. It's almost starting over except they have a company with revenue. Adobe also has that and each new product attempt fails or wins independent of Photoshop's success. And Adobe and MS products are more related to each other than file backup and editing.
Dropbox the product is a good revenue stream and could spark another Microsoft/Adobe style multiproduct software company.
Is that Paul Graham meant by start to chip at the big vision with a beachhead though? Because then any product idea has that potential, as long as it starts the first company. Seemed like he was advocating for a more direct path, hacker search to more general search, basecamp to email, etc. Starting companies is hard anyway, start with a clear path to something big.
But to me it doesn't seem a huge leap from "we keep your files for you and get them for you wherever you are" to "we let you do things with your files" or "we keep other stuff for you too." It seems like a very natural proposition to offer users.
They can become the file system for the internet. If they're successful, many futures apps (mobile or desktop) will sit on top of Dropbox software to sync files and app state for their users. That is an incredibly powerful vision.
> If they're successful, many futures apps (mobile or desktop) will sit on top of Dropbox
This sounds like a great vision for Dropbox to follow, but I just can't shake the feeling that the future is going to ultimately look a lot more like what Google is doing with docs, and eliminate the need for most offline/native apps at all. And if in the best case, Dropbox is still going to be dependent on offline apps, I guess it just feels a bit limiting.
I'll admit as much as the next person that the current wave of web/browser-based things (games, operating systems, phone apps, etc) feel seriously lacking, but given enough time, I just can't imagine how this isn't the direction the future is heading. Dropbox makes it amazingly easy to backup, version, and share files right now, but if all the apps you use would already be doing that for you, what would be the point? Or rather, how would Dropbox pivot to account for this?
I think Dropbox is awesome, and that vision you're describing is great, but I would imagine that there is a very specific window of opportunity for when they would have to take action if they want to see this type of 'endgame' have any real impact.
What if you could edit all your files in dropbox' html interface? What if it was easy to do, and kept the simplicity they've become known for?
Then your OS would be a commodity, and Dropbox would be what provided the value. Seamless editing of documents across devices, no matter where you are or what sort of device you're working on.
Ubiquity. Once dropbox becomes essential for a large number of mobile or web-based apps (and their users), it becomes indispensable. With this comes a lot of possibility for monetizing either from the users or the vendors.
Of course one could say that's the same goal for just about any consumer-facing startup these days.
Amazon was only new books in the beginning. Once you get a market started, you can add other products. But for used cars my imagination is only good enough to see another ebay as it's extension.
Those who disparage "X for Y" descriptions misunderstand their use. When you have only a few minutes (or seconds) to pitch your idea, being X for Y or the X of Y is an effective way to give people the gist and pique their interest. Only then does it make sense to go into more detail and explain the full scope of your ambitions.
Exactly. Only a minority of companies that use those pitches used the same phrasing in their initial creation process. The goal is to solve a problem someone has, the "X for Y" is a shorthand for "don't take my word for it that people have this kind of problem, look at this very similar situation".
I had the exact same reaction when reading coverage of the demo day. Hopefully the ideas seem underwhelming because of the last part of Paul Graham's essay. In the "tactics" section he says, "If you want to take on a problem as big as the ones I've discussed, don't make a direct frontal attack on it." Maybe these YCombinator startups actually do have ambitious ideas, but they're starting out with something small and seemingly unimportant. Maybe in five years some of these companies will be reinventing education and communication.
Ideas change. Apple didn't start with iPhone or iPad. They started with the Apple I, which was just a circuit board. Microsoft didn't start with Windows 7. They started with BASIC for the Altair. Paypal didn't start with online payments. They started as money transfer between PDAs.
As for the criticism about "X for Y", the problem is not with them, but with the rest of us. Most people (smart or not) have a hard time grasping completely original ideas, and they don't have the time to dive deep into it. "X for Y" is simply a low bandwidth way of transferring a core idea. It's the MVP of communicating your vision. If you have to take more than a sentence to convey your idea/startup, you're going to have a hard hard uphill battle. But chances are, you don't have a clear understanding of what problem you're solving.
"With the press these companies are getting, I expect they will make investors and founding teams a hefty profit, but they certainly do not speak to me as signs of brilliant, innovative thinking."
This is something I've seen several times, I don't believe anyone has shown that 'press coverage' was a causative agent in a successful exit. I believe 'delivering a useful product' (which happens to generate press coverage as a side effect) is the missing piece here.
You want a brain dead stupid IOs App I would buy that is derivative? Instapaper for Printers. Which is to say I would love an App where I could launch it on my iPad and then 'print' to it across the network from my Mac or Windows machine. I don't care if it dropped the printout into iBooks or created its own 'space' (I could imagine a designer would have fun with the old 20th century printout distribution bins). But basically there are times when I wish I could print something out and then read it on the road later. It was a capability discussed for the old Plastic Logic Reader that never saw the light of day.
And yes, I still do 'listings' when I'm studying old code or dumping a bunch of numbers and charts.
A problem I see with many of these ideas is what I would call the profitability mirage. The general belief is that the flow is: $founder->getStartup()->iterate()->getUsers()->monetize(), with a AcquiredException thrown somewhere in one of those method calls.
The problem is that so many of these startup ideas (that don't happily see an AcquiredException before monetize() is called) will fail at the monetize step because there is steep competition in many of these markets right now, and the burgeoning startup mentality means that someone else is probably doing exactly what you do, slightly better or worse, but they're at a point in their business cycle that they don't need to call monetize() just yet. Thus, you may have a mass exodus of users at precisely the point where you try and bring your ARPU above zero.
If the default behavior of a program is to throw an AcquiredException after a few iterations, I wouldn't call it an Exception in the first place. imho, the real exception here is the monetizeException.
I'm not sure what the value of this post is? Would you honestly expect every company or even every demo day to contain a frighteningly ambitious idea? And if they were frighteningly, scarily ambitious, would TC really hype them? The sane response seems to be to write them off instead as far too ambitious.
I guess I just don't get what the skepticism here brings to the table? I'm open to input about that.
I've sent the list of companies from the latest batch to several non-tech friends and not a single person has been impressed with anything on the list. That's not a good sign.
With things like Dropbox and Reddit not only did my eyes light up, but the eyes of non-tech friends lit up. Same with Hipmunk. Hipmunk I didn't even have to show someone, I could just say "not shitty airline search" and they were intrigued.
I think the point to this submission and others like it are that a lot of people are scratching their heads over this current batch. Nobody expects every company to be "Wow!" but generally there are a few.
I would imagine that the point is to encourage future entrepreneurs to avoid the two trends pointed out in the post. YCombinator and TechCrunch are both trendsetters, so it makes sense to express skepticism if you have a problem with the types of ideas TechCrunch is covering from demo day.
I don't expect the batch to contain all frighteningly ambitious ideas, but it would be fun if at least one was. I'm sure YC would be receptive to such a plan if the founders were smart.
I think this is another in a long series of articles that mistakes the press coverage for the vision. When journalists say "we're x for y" that's their way of conveying the information in a way that makes sense to us, by relating it to something we already understand (at least usually: I've seen TechCrunch use increasingly esoteric examples for "x" of late).
In some cases the companies themselves use that line in their pitch. This isn't surprising, given that it's such a fast and powerful way to give people a rough idea of what you're doing and how short each presentation at YC demo day is.
But that doesn't change the fact that in either case, this is just shorthand and isn't reflective of the grand vision of any of these companies.
The “we’re X for Y” is awesome because it is a simple, powerful positioning. That's also why it can be misunderstood so easily.
The same model is used in pitching screenplays and movies. Alien, famously, was pitched as "Jaws in space". It works because it sticks, but doesn't define the field (the plot etc) too much. Similarly, startups using the “we’re X for Y” are giving themselves a quick mental positioning in the mind of the listener, but without carving an exact niche. It is easier to work up or broaden from defining the idea ('the beachhead') that way.
The way to misunderstand it is think that they mean to do exactly that. "What, they're taking a giant shark onto a spaceship?"
There was a TC post encouraging startups to pitch their slogan in a concise format which did not follow the x for y pattern. In a few more words they mostly avoided the problem you are presenting here.
The problem is press coverage. The press needs to be able to write a story. In order to write that story, they have to understand (quickly) what they are writing about and deliver it to readers in a way they can understand (quickly). So if someone demo's a way for doctors to track medical records and an algorithm that uses all of this data to improve point of care diagnostics, what do you call that in a headline? Google for Doctors?
The reason why I bring the medical example up is because there is a team here that has a frighteningly ambitious start up (not idea yet). Medigram is a stacked team that is going after the medical industry in a way that no one else wants to. Starting with a messaging app that complies with regulators, they are planting the seed of trust with the medical industry. When they move up to records, they get data. When they get data, they use that math heavy team to solve the ambitious idea of making diagnosis more accurate. Then who knows? A tiny pill that you can swallow that transmits blood test data back to a central server and diagnose your issues instantly? I don't know, but they had to start somewhere.
Unambitious startup ideas can be conjured up by a small team and sold to a big company later with hardly any up front dollars. If you want ambitious you should look outside the realm of 100% tech startups. Specifically, you should look in the food/tech realm - but don't look at the worthless calorie counters.
Disclaimer: I work for a struggling startup in the food/tech realm.
Cool article! I think a broader question raised is one I have thought about a lot: what is the optimum trade-off between narrow clarity of function/purpose and broad ambition/expansiveness/spread of features? On the one hand: we obviously admire and use things that are ambitious and full-featured (google, facebook, etc. etc. etc.) On the other hand though: HS points out that the narrowed "X for Y" model makes a better YC pitch... but more importantly, it might make a better consumer pitch. E.g. sometimes I wonder why I don't use wolfram alpha more often... and I think one of the answers is that I don't quite know what it does. It possibly covers TOO much area and I might- at a moment of quick snap judgement- pick the far more limited service with the easily comprehensible/memorable single feature claim... Thoughts?
The hard ones don't get press for years. Look at upvertr, sure it could be described as git + electronic software + parts sourcing, but it will take them a while to build this to the point where everyone will see how amazing and useful it is.
I fail to see why companies that make money would fail to satisfy an investor?
Is there something about the YC model that makes companies that go on to turn modest profits not generate returns for the investor?
A business like Wal-Mart wouldn't satisfy you as an investor? I wouldn't have any problems taking 8% of Wal-Mart. Wal-Mart didn't invent anything new, they just did it a little bit better than their competitors. Techcrunch 1969: "Wal-Mart: Sears for people who like to pay less"
Impressive algorithms don't make money, businesses that satisfy customers do. You're not going to 'change the world' unless your customers are happy.
Walmart is a world-class innovator in supply chain management, retail engineering, shipping logistics, inventory tracking... the list just goes on and on.
Walmart is one of those things that is just so effective and so pervasive that we forget how important its original ideas are. It's like learning to like music in 2003 and hearing the Pixies for the first time and not getting it; you don't realize that virtually all of pop/rock music for the last 20 years is built on stuff they popularized.
But unlike the Pixies, Walmart has ruthlessly refined and improved their systems instead of breaking up the band with a faxed message from Black Francis.
Point being: innovation isn't always easy to spot in a simple paragraph on a message board.
Whoa! Wal-Mart revolutionized the supply chain. And Wal-Mart also started with a revolutionary idea: We can make stores in rural areas so people don't have to drive to the big city to shop. Every other chain considered those same rural areas unprofitable. It turned out to be a gold mine.
There are several books out there about how revolutionary Wal-Mart has been. I suggest you read one before assuming that Wal-Mart "didn't invent anything new"!
I don't disagree that wal mart is an innovator and that their innovations allowed them to crush their competitors, but from the perspective of Wal-Mart in 1969 they aren't doing anything new. At that point they're "Sears for people who want to pay less" which illustrates the silliness of OPs POV.
Fundamentally though Wal-Mart's business model is "big truck - small truck" it's just a specialization of Sears business model, similar to how all the businesses on TC are X for Y.
Let's just imagine the one-liner of the big companies today:
- Google: Yahoo with PageRank
- Facebook: Friendster for colleges
- Dropbox: Files sharing made easy
- Yelp: User reviews for restaurants
All ideas seem small and narrow at the start. It is true that you should recognize the possible direction the startup could go, but as PG said before, it is important to first make something that a group of users really really love. From there, you start growing into something bigger. The main point is that you may not know what it will grow and evolve to when you first start the company.
As an ordinary person outside of the VC world, I literally have no idea what Airbnb is. Never heard of them once. Ever. I think there may be a mismatch between what people who read Techcrunch consider exciting and what actually has traction with the public at large.
Be aware, you've linked directly to the home page of your tumblr instead of linking to the post itself. Your HN submission will become very confusing after you make another tumblr post.
"If I were Paul Graham, these types of companies simply would not satisfy me (despite what look to be very lucrative payoffs)"
There's a difference in investing in companies expecting some kind of a return and throwing money at really ambitious ideas in the hope that one of those gets really successful. I cannot see how investing carefully and getting returns (ie. making money) is not satisfying.
This is delirious. The OP should have just read pg's essay on how to apply to Y Combinator. He clearly explains there (and here again) why the X for Y representation helps in getting a foothold.
Also, what does OP expect founders to do? Declare their complete vision beforehand to impress the audience. The purpose of a vision is not to get popular with the tech press, but to guide the founders.
A wise man once said "Nothing is original. There is nothing new under the Sun. It's never what you do but how it's done".
While I agree that saying "My Product X is like Y on steroids" is somewhat unoriginal and maybe even uninspiring, the simple fact is that every idea is pretty much an evolution of a previous idea.
That being said, I'm not to sure what the point of the article was :)
I think the idea of describing a startup as "like X for Y" is OK for some but in general I agree that it comes across as not being particularly innovative. I think it makes sense to give prospects a frame of reference for an offering but there are other ways of doing it aside from defining your entire company in comparison to another one.
I agree. People want to know very quickly what the idea is and what it's comparable to. I believe that it gets the audience more engaged in the fact they don't need to make the connection while learning about the product throughout the presentation.
We've been told countless times that the only thing VC's will fund is ideas that are already being done. The reason's given are so when the entire niche fails they can point and say "see, everyone else failed, its not our fault." The reason nothing innovative is ever done is because no one is willing to take the risks.
I don't think anyone can realistically expect to find a google-scale diamond in the rough at every single YC batch. "Frighteningly Ambitious Startup Ideas" I suppose is about a process of collective unconscious iteration that would yield such a diamond every 5 or 10 years.
the only problem with this post is that Google was like Yahoo but that search actually worked, Microsoft was like IBM (the software bits) but software for the masses. There are a lot of counterexamples where starting with something existing provides a beachhead for the ambitious.
Well everybody has an opinion, and a choice to tread on a path that feels "right". For a moment you might think these ideas are unambitious, but when you dig-deep you'll discover a lot of gems underneath. One wouldn't expect a frightening execution, speak or quality within six months of a startup.
That's probably a picture only big daddies like Apple can show to the world. For example on another thread you can already see DuckDuckGo revealing their ambitious face after a perceivable unambitious journey of two years!
Also another thing that probably we all miss is that the next big thing might not necessarily be anything from the ones ever listed - ambitious or unambitious. None of the big names like Facebook or Google or Apple were frighteningly ambitious ideas to the world until they kicked butts of everyone.
On second part: Suggestions on choosing a worthwhile domain name is really nice, but looking at how much has been squatted out there, there doesn't seem much of a choice or harm with the current trend of choosing twin word names.
There are fewer cheap options at disposal of entrepreneurs and so it is for the rest of the world.
That's hilarious, because I'm the one who wrote all the summaries of the startups that she's judging them by. I deliberately express startup ideas as x for y whenever possible because that's the most efficient way to describe a startup in a few words. Airbnb, for example, was in its day "eBay for space."
On Demo Day we accompany each startup's name with a brief summary of what they're doing. The goal of these summaries is not to convey the full breadth of a startup's eventual ambitions, or even what they're currently doing, but just to help investors watching 65 presentations remember which company is doing what. TechCrunch reused these descriptions, as reporters often do. And now this woman has read the summaries printed in TechCrunch and is treating them as if that were all there was to know about the startup. It's like a game of Telephone (http://en.wikipedia.org/wiki/Chinese_whispers).
My standard advice to startups presenting to investors is that it's better to start with an overly narrow description of what you do, so that investors at least know what you're talking about, and then expand from there.
See http://paulgraham.com/investors.html, particularly items 1 and 14.
It's surprising to me that someone who wasn't even at Demo Day would feel confident enough to judge the startups' originality based on the 3-5 word summaries we use on the schedule to help investors keep them straight in their heads.
I was about to say that it's also surprising that people would upvote such a post. But on reflection it's not that surprising.